Archive for January, 2011
As blog interest once again accelerates towards new highs with the launch of Trading After Dark (TM), it’s time to shift the format of this ongoing journal to reflect its natural evolution.
For the past 31 months, I’ve spilled every ounce of thought possible in terms of describing real, bona-fide trading.
Through over 800 posts – including countless parables & painfully true personal trading experiences, over a hundred videos, trading log transcripts, copies of public presentations, and formal educational tools, I’ve tried my best to tear down the shroud of darkness and deceipt that too often surrounds this industry.
And you’ve seen it all … or as I like to call it, the good, bad, and ugly of the life of a trader.
Want to make a living as a trader? First, read this journal … it hopefully will make you think twice.
Objective #1 accomplished.
Still want to make a living (or run a solid secondary business) as a trader? Then re-read this journal again, yet with a different light in terms of learning from the potholes of the road I’ve traveled.
Still want to go further? Get a solid education to reduce the substantial cost of “market tuition”, whether it be through the Jellie efforts or via bona-fide efforts with people who know what they’re doing and have a pedigree. At this end, I’ve simply tried to provide that which I wish I had when I started.
Objective #2 accomplished.
Yes, it’s true my fund is up over eight-fold since its 2004 CME inception solely as the result of intraday wholesale trading, which – along with the single year 2008 – will always rank among the best short- and long-term performances by any trader in my asset class. But let the record also show that in doing so, I’ve at times been battered, beaten, burned out, and tossed around like a rag doll when I haven’t been on my game, or when the lesser probability outcome occurs.
You see, you simply can’t have one without the other. Or said another way, no one reaches great heights by playing it “safe”.
So as we move forward, I’m going to take a bit of a blog sabbatical (one of my objectives in December’s presentation to LBR group) and let TAD do most of the talking … albeit on a far less frequent basis (quality over quantity) than the daily dialogue you’ve grown accustomed to over the last three years. Such will also allow me more time to focus on my new CIO role for an investment firm, as well as what will likely be the only live Jellie effort of 2011 beginning in two weeks.
Simply put, TAD is the only tool I haven’t yet used to try to rip the shroud into complete oblivion.
Consider this final Objective #3.
# # #
Which brings me to the overwhelming response to the the TAD pilot effort.
I’ve purposely not responded to comments or emails so as to first digest things at this end, and likely won’t respond to specific ones due to redundancy to that which is well-chronicled in this blog and educational material.
First, my thanks to everyone for the feedback. For the record, the % positive response with a very good sample size is darn near close to 100% … which exceeded my own expectations.
Blog comments, YouTube views, Emails, twitter followers (merely via your word of mouth), and site traffic are all approaching record levels.
Now whether this small spark and the flames that follow it will significantly influence the perception of trading throughout the industry remains to be seen, but the feedback certainly indicates that we’re on the right track. btw, I’ve never had a problem being a pioneer in this industry, even if it means a few arrows in the back!
As was the case with the Jellie program launch, despite extensive thought, planning, and foresight at this end, it was critically important to first test the concept before expanding it beyond the pilot effort. Call it a “probing” trade that carries virtually zero risk – aside from possible personal embarassment if it flops, which doesn’t rank in my top 10,000 of things that bother me – and only upside for the viewers and industry.
For example you may recall that ALL of the beta Jellies in ’09 had the chance to get their money back as we worked through the initial program, and I was ready to end it right there if feedback suggested as such.
Of course none did, and their feedback, enthusiasm, and prodding led to further refining it into what is now one of the most extensive video educational series and trader development programs in the industry.
But back to the pilot.
For now, TAD remains a bit of a “hobby”, and is of course very secondary to my main fund management businesses. As such, I have no clue as to what its frequency or episode timing will be like. For example, it could be weekly, or some days if I have time, I may simply feel like posting one “quickie” 5-minute snippet. So please be nimble with your expectations and check back often. If you use twitter or RSS, you’ll be notified when each episode is posted.
Yet like any worthwhile hobby, I had a ton of fun preparing for its launch, and certainly plan on sustaining and growing it.
Here are a few highlights in response to some of the feedback.
And like those programs, time and production constraints simply won’t allow for much more than showing selected relevant hands, ranging from the well-played to the brain cramp or bad beat, and everything in-between. And yes, there will be trades placed days and hours before, as well as hours and days that follow that won’t be addressed or ”televised”.
As will be noted at the outset of each episode, TAD is NOT meant to encourage anyone to pursue trading, OR to teach. Frankly, anyone looking to learn how to trade by watching it or exchanging comments or emails on this or other sites (and believe me, there are MANY) will end up like a pilot apprentice trying to learn to fly by watching Top Gun or emailing the pilot after a Seconds From Disaster episode on the National Geographic channel. Remember, the pilot is likely flying another mission as you attempt to bombard him with questions!
If you’re truly interested in learning the trade, or “how” I trade (and yes, the Webinars do discuss typical FOMC rhythms as noted in the Syllabus), there are ample formal programs available that incorporate all of the elements of trading far beyond televised single-sequence management.
Having said that, TAD IS meant to be enlightening in terms of continuing our mission of the “balanced” transparency … and most of all, FUN!
In terms of what’s in it for me? I’m glad you asked.
For example, you may have noticed that there’s no advertising … which of course could change if it goes network.
On a personal level – and this is critically important – it’s also not a self-indulging excercise. For I have nothing left to “prove” to myself or anyone else in terms of skill or performance over time with both small and large account sizes and in multiple market conditions, and have survived the unavoidable bad beats and slumps – including those well-documented in these pages – that are part of the business to rank ahead of most of my peers … although there’s ALWAYS room for improvement and growth lest we so quickly forget the December webinar or the Og Mandino quote at the top which has been with us since day one.
So I ask again, what’s in it for me?
Well, it’s yet again injecting a heightened personal passion for the business. I’m also viewing the personal recording of my sequences similarly to that of my initial blog, scorecard, etc. in terms of seeing if it can further improve my weak spots, just like a major league batter would watch film of his swing.
With respect to live (at the time) narration vs. a director’s cut type of recap which some of you have asked about, I’ve thus far found it to be both technically difficult (PC memory constraints if I include the webcam) and not very helpful to either me or the viewer. For example, there are long periods of silence, and I also often focus best when I’m simply quiet, which results in more realistic results. So I’ll have to noodle on that a bit.
Now as was the case with the blog and Jellie program launch, I imagine that as we move forward, exposure and interest will grow, and the tiny minority of people who simply love to “tear things down” will all take their shots.
For example, there are still traders – including this week – who are convinced that successful trading is a myth, and point their fingers at everyone but themselves.
A reminder to myself that when I don’t perform well, it’s 100% my fault because I didn’t focus or wasn’t alert to changing short-term or longer-term market or personal dynamics … NOT the market’s. For a truly successful trader who stands the test of time takes constant and critical notice of his/her environment and is adaptive … which is why I don’t advocate “systems” that only work in single environments a.k.a. the Turtles, and is why we properly improved the term to “Jellies” … duh!
So, as we move to the next phase and increase our collective exposure, I’ll reprint the following excerpt from my September 2009 post for those who continue to believe that one has to be a Wal-Mart to begin or run a profitable business.
Frankly, I’ve never understood why some in this world will stare at a blue-painted wall and call it red until they truly convince themselves it’s red. And then they’ll try to convince others that it’s red … using every tool and argument they can muster. Or they’ll simply state it’s impossible, too hard, or too expensive to paint a wall blue … or that it can’t be done unless one was a member of the union of professional blue painters.
Perhaps it’s because they simply hate blue (btw, nothing will ever change that), or just that they enjoy unproductive habit of believing the glass is always 1/2 empty vs. 1/2 full. Or perhaps they’re simply in denial. All I know is that they can call the wall red all they want, and the wall will always remain blue.
At my end, my goal in life isn’t to be liked or disliked. It never was and never will be. For years ago I was placed in a public trading role, before going off the grid a few years ago to focus on my own needs and ambitions, before realizing that simply serving oneself — while being the easy road in terms of not having to deal with the complexities that comes with public exposure — wasn’t exactly helping anyone other than, well, myself.
So I bit the bullet, and again chose to open myself up to the doubters and skeptics to prove once and for all that a certain level of success can be achieved under the right conditions of personal focus and commitment, while remaining steadfast that opening myself up once again could hopefully make a small difference in the trading “community”. Yet in doing so, keep in mind that I’ll never waste limited and precious energy defending the blue wall, lest we waiver from more important tasks at hand.
If TAD accomplishes nothing else, it will hopefully allow EVERYONE to see the true color of the wall through the eyes of those who painted it.
I figured the lemonade stand was a pretty good place to start.
Thanks again all … until the next “episode”.
Less than four months ago I promised we’d begin a new chapter in continuing our mission of financial industry transparency and trading reality.
Well, after weeks of preparation, technical testing, re-testing, order entry platform changes, and testing some more, it’s time to dim the lights and pull up a chair.
Click on the pic below to link to the premiere … in high definition.
Barring any foreseen technical difficulties, look for a Trading After Dark beta premiere later tonight.
The pilot espisode topic?
As promised, my goal is to initially gear it to SMALL accounts.
How about a 30 minute “director’s cut” of trading the ES during FOMC (yes, today’s) with a small five figure account?
In the meantime, check out today’s earlier post on fading the status quo if you missed it.
Or grab some popcorn while you wait.
There’s an old campfire game that many of us have played.
It’s the one where a story gets passed from one person to another, and by the time it gets back to the initial person, it hardly resembles its source.
So I’m going to start today’s post by clearing up a few misconceptions on my views on “feel”.
Now recently, we’ve discussed the importance of a trader’s development of “sense” and “judgement” for those who choose to forego programmed black boxes and trade in a discretionary manner. Yet since we’ve pretty much beat that topic to death over the past few years, I’ll leave that one alone and let you forage through the 800+ pages of the blog.
Yet there is one obvious and incredibly important component to my personal definition of the word “feel” which some are missing, and that’s the “feel” of the market which one is trading.
For ES, like any other trading instrument, has a … well, we can use several terms such as “rhythm” or “pace”, but I’ll go with “feel” since it’s been thrown out there.
As locals know (both the early day floor traders and current-day remote electronic ones), one of the benefits of trading a single instrument (vs. multiple instruments with similar patterns) is you get to know your trading instrument like a musician knows his/her instrument.
Or like a parent gets to know its child.
For over time, one develops, yes – a FEEL – for the heartbeat of ES.
For on-site traders, it may be the feel of the action and sounds around them. Which is of course why many former floor traders initially struggle when shifting to off-the floor trading.
Yet as an off-the-floor trader, I view the feel of the ES contract incredibly important.
Which of course takes – here comes our favorite word again – time (which btw is the reason I DON’T do “cram them in” single-day seminars and will ONLY instruct if asked over a long period time … for it takes time to get to know your “child”).
Well for ES, I’d start with the following:
How does it normally respond to the Europe morning session?
Does it lead or lag and to what extent?
How does it normally react to Economic data releases?
Does it matter whether it’s the Jobs report or Consumer Confidence?
What about FOMC? The morning prior to the release? After its initial release?
How liquid is it during the Globex session? U.S. Morning Session?
Midday? U.S. Evening Session?
How relevant are the posted DOM bids and offers?
Does it differ based on time of day?
What about its relationship to VIX? TICK?
How sensitive is ES price to moves in either?
Does it have a tendency to take out stops before reversing, and if so, how quickly?
I could go on and on, but hopefully you get the pic.
Yes, trading is all about “feeling” … in THIS manner.
Anything less is trying to dance without music.
# # #
The other topic I want to address is the topic of “fading” markets.
For if I had a nickel for every time someone asked me, “Do you “fade” markets, and if so, isn’t that dangerous?”, well … as they say, I’d have a pile of nickels.
I “love” this question because it has one simple answer.
Every trade ever placed by every speculative trader in the history of trading is essentially a “fade”.
A “fade” of the immediate status quo of price with an expectation of a different price in the future.
I’ll even go a step farther and say that anything worthwhile ever accomplished in life, was a “fade” of the status quo.
Thomas Edison faded the notion of reading by candlelight.
You bet I “fade” markets.
In every trade any trader ever has or ever will.
Is it dangerous?
I’ll let Annie Duke respond, who will remind us that it’s not the outcome of any specific hand (due to variance) that’s relevant … or perceived to be “dangerous” … but rather the outcome of the entire range of hands ever played.
Then again, maybe Christoper Columbus simply had a pretty darn good “feeling”.
Just ask my wife and kids.
And while it make take more time than I’d prefer, tell me I can’t do something, and I’ll eventually find a way around or over it … or simply blast though it.
In this case, the “telling” entity was simply the limits of even current-day technology with respect to producing a high-quality Trading After Dark (TM) experience.
And I certainly now know why it’s never been done.
Call it the ultimate Goldilocks challenge in terms of seeking the right balance of: screen capture space (not too much, but “enough”); visbile clarity upon upload (which is directly related to the screen space issue along with file sizes); duration (preferring more frequent small snippets vs. drawn-out sequences which consume valuable memory and viewer time); viewer compatibility (preferring the ease & versatility of YouTube vs. other players); fun vs. educational; not negatively impacting my trading focus, and … well, I could go on and on.
Yet after running 24 test uploads of various formats this weekend, we’re VERY close.
The best news is that I’ve pretty much resolved most of the production issues so that we’ll be able to use YouTube’s HD 720p capability for broadcasting … which was essentially a requirement at this end to ensure greatest ease of viewing and dissemination.
Soooooo, stay tuned.
If I time it right, perhaps we can squeeze it into the Super Bowl ads and have a direct trading competition with the E*Trade baby.
And while I’ve been busy on a number of fronts including devoting time to a new Chief Investment Officer role, every now and then I simply run out of words … yes, even me.
So this morning I dedicated myself to taking a few minutes to clear the head, and then begin hammering away at the keyboard.
At least that was the idea.
Yet every time I began, I had this sense of “been there, said that … again, and again, and again.”
You see, from the day I ended my multi-year “Where’s Don?” public hiatus in July 2008 to today, the vision for this blog was always to provide a limited window into the intimate inner workings and thoughts of a trader.
Much like, as some have said, a current-day Reminiscences of a Stock Operator edition … except with the substantial difference of being current, interactive, and in real time.
Many charter onlookers will recall that I’ve felt several times that the blog has run its course, most recently in the July 2010 “Journal Epilogue” as I began indexing the initial two years of content on the old site for historical preservation.
Then a funny thing happened as that one-day “epilogue” essentially morphed into a six-month one as we discovered more tools and ways to help each other.
Yet once again, I find myself at a crossroads, wonder if we’ve said all there is to be said, and am considering simply preserving the the 800+ posts for historical reference.
Deep down, I’ve always felt when all had been said, then … well … all will have been said, and it will be time to put down the virtual pen.
And for the past few days, I’ve simply been low on ink.
I wish I had some trading pearls of wisdom to share this morning.
Perhaps another parable between trading and life.
Perhaps a reminder that with God’s strength and grace, truth trumps lies, hope trumps despair, and defeat is never final unless you choose it be.
But I don’t.
For now, the echoes of December’s webinar, posts of the past few years, and optional in-depth educational opportunities that are collectively intended to make a difference in – as I said last weekend – “filling the half-full glass” … will have to do the speaking.
btw, December’s presentation (slides or video) provides a far better long-term perspective of this business better than any single post … or even thirty months of blogging … ever has or ever will. It’s free, and the only investment on your part is a few hours of time.
So for now, the pen is quiet.
P.S. As many know, I purposely don’t do many public appearances. So for those who have asked, and despite the immense popularity of last year’s New York Trader Expo appearance where we had the fire marshalls scrambling, I won’t be presenting as I’m just not that “into” the marketing speaker circuit. Dumb business plan perhaps, but as I said in last weekend’s video, I prefer to open doors rather than knock on them.
How relevant is trading “feel”?
Is trading an art or a science?
What are we supposed to do with success?
Is the glass half-empty or half-full?
In today’s longest (17+ minute) video yet, I refer to a recent onlooker’s question to provide my perspectives to all four.
You may find my response to the final one – at the end of the video – a bit surprising.
You may or may not remember me, but ten years ago to the day, you responded to one of my industry columns with the following email:
“Who the hell are you and what kind of trading insight is this? Talk to me in ten years, and if you’ve somehow survived (ha!), then I’ll listen. Good luck with that.”
Make that mad. How dare he!
Especially because you were an experienced veteran of the markets and I respected your opinion. And as a result, perhaps because deep down I felt you were right.
Then as time went on, that feeling morphed into a growing conviction that you were right.
Eventually, as months turned to years, I knew with certainty that you were right.
Since the day I received your note, I haven’t forgotten about it.
Ten years. 3,650 days. Trades too numerous to count.
Tom Brady still uses the “sixth round, 199th overall pick in the draft” as one of the greatest motivational perspectives ever used by any athlete.
Well, your letter became my personal 199th pick “chip-on-the-shoulder” mantra.
I’ve had this day marked on my calendar for a long time, with the intent of writing to you once again.
So here I am, and I’d like to share with you what I’ve learned over the last ten years.
You see, I’ve learned a great deal over the last 3,650 days.
I’ve learned – in spades – the important concepts of longevity and time.
I’ve learned that anyone can read a chart, make a correct trading “call”, write a column, or otherwise voice their opinions on the market, but few will have the courage and heart (remember the Annie Duke interview) to follow through and put their money where their mouth is … year after year after year.
I’ve learned that you can never rest on your laurels, and you’re only as good as your next day’s performance.
I’ve learned that “falling gracefully” and “living to fight another day” are two of the most important attributes of this business.
I’ve learned that pressing hard when the time is right is equally, if not more important than falling gracefully.
I’ve learned that bubbles are bubbles and that the big wins come from counter-trading prevaling emotion at the right time.
I’ve learned that once in a hundred years, a black swan can appear where the Dow can lose 1,000 points in a heartbeat and that all of the industry’s protective circuit breakers can … well … break.
I’ve learned that a very small corner of this industry hates it when others are successful, and will spend their days and nights berating, doubting, and questioning motives versus emulating and working on their own game. ummm … J-E-T-S, Jets, Jets, Jets??
I’ve learned that some will use every excuse in the book to convince themesleves they’re not capable of reaching heights of excellence. Personally, “I can’t trade his size” comes to mind as one of the most lame and lazy arguments that I hear. As I said in New York last year, we ALL started small and both the local hardware store and Wal-Marts generate profits if well-run.
I’ve learned that the market will beat, challenge, confuse, and batter its participants senseless at times (when we haven’t beaten ourselves).
I’ve learned that knowledge and experience are only effective when combined together.
And finally, I’ve learned that faith and trust in God — during the bamboo planting, waiting, reaping, and waiting again — are the most important prerequisites for survival in this business … as they are in life.
It’s because of these lessons … and your letter that spurred many of them … that allowed me to not only survive, but – by the grace of God – reach heights I never dreamed of throughout your ten year prerequisite.
Some day, the trading, blogging, and trying to pay it forward will stop … whether be by choice, age, or circumstance.
Until then, I’m going to continue to dump every ounce of knowledge and experience I can muster so others can walk in the storm’s footprints instead of blindly stepping through the snow and hoping there’s no crevice beneath.
Some won’t understand that.
My guess is in ten years, they just might.
P.S. My only problem is that your old email address is now invalid. I only hope you’re somehow among the onlookers.