Archive for Personal Trading
Thursday Notes – Dancing With the Stars
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One thing is certain … it will end.
Nothing lasts forever, whether it be Cal Ripken’s ironman streak, New England’s perfect 2007 NFL season that was only interrupted at the very end by that famous non-holding call and Hail Mary Helmet-Catch in the Super Bowl, my prior extended trading “zones” including 2003-05 & 2007-09, or now … this recent dance I’ve been doing with the S&Ps that is getting downright ridiculous.
Yet for now, I remain in one of those scary Johnny Chan or Phil Galfond grooves where personal focus, reads, executions, and market action are all teaming together to put me in what has essentially become an ongoing trance.
By now, the current Jellie team is probably wondering if I ever lose since we’re still awaiting the first losing session in three weeks.
And while I assure you I keep telling them I’m not always on my game (as was evident a bit yesterday morning when I simply stood aside and didn’t “feel” it until the afternoon session), for some reason I’m simply in one of those extended zones … even while narrating to them live while trading.
Probe with pre-flop bets and add with post-flop confirmation? The market cooperates.
Force the action by raising bets aggressively? The market cooperates.
Scalp 2-3 tick moves? The market cooperates.
Back off because I’m tired? The market tires.
When I stare at today’s actual trade plot chart (attached), it almost looks as if the results were rigged. Of course, since it’s a TT platform auto-capture and I narrate my actions live to my coach and 14 other traders, we know that’s not the case.
My only current challenges are to (1) convince the current team it’s not always like this, and (2) continue to maintain the confidence and rhythm while keeping the ego in check.
Oh, it will end.
Just not today.
Tuesday Notes – Money Never Sleeps
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Yes, I’ve been relatively quiet lately – especially intra-week – as day eleven of our nineteen day training journey is complete.
And yes, we’re still waiting for our first losing session … so let me get that out once and for all as (1) it’s not abnormal, and (2) I don’t believe in jinxes.
As I told the team, when you’ve figured out this business … I mean really figured out this business in the context of being the casino and not the speculator … you should expect to win the vast majority of the time.
Yet that’s not the purpose of this post.
Rather, the purpose is to continue to remind all traders who are no-nonsense, buckle-down serious about this business, that you have to continually work harder and sacrifice more than those against whom you’re constantly competing.
Today was probably as good as an example as I can provide. And since it’s the end of a VERY long day, I’ll skip right to the shorthand in the context of a time-stamped recap.
Monday 9:15pm ET – Wrapped the evening team session reminding everyone that we’d be looking at a monster MATD (Morning after Trend Day) on Tuesday morning, and that it was possible the best setup would be in the Europe session given how the day closed.
Monday 11:00pm ET – Had to decide whether to sacrifice a good night’s sleep for the 3am Europe open. Decided given the significance of the close to set my alarm for 2:30am.
Tuesday 2:30am ET – First thought: Damn … is it 2:30am already? Second thought: Check the charts. If Europe opens on or near late day supports, trade. If not, go back to bed.
2:35am ET – After taking care of business (find that in any trading book … yea, I know, TMI), checked the charts and realized the market was kind enough to set the golf ball on the tee … with the golf ball appearing as large as a watermelon.
Cleared the eyes and mind and figured I’d have enough energy for about 90 minutes of trading … which would hopefully be just enough to catch the first move up.
2:45am -4:00am ET – Traded Europe’s opening MATD sequence by probing on support prior to open and adding upon Europe’s confirmation of the up move.
4:05am ET – Back to bed for a few hours of shut-eye before the Jellies would gather at 8:15am.
7:30am ET – Tossed and turned and only got about an hour’s sleep. First thought: Damn … is it 7:30am already? Second thought: Make sure you’re at least coherent until noon when you can take a pre-FOMC nap.
8:30am ET – Took the pre-housing news move to support long, taking it out on the pop.
9:30am -10:30am ET – Traded the early tight MATD U.S. session oscillations (the mega oscillations had already come in the Europe session as is often the case), nailing dang near each bottom and top.
11:00am ET – Faded the MATD first hour range break back into the range.
Noon ET – Nap time … whew. Alarm set for 12:45PM ET.
1:00pm ET – First thought: You guessed it. Damn … is it 1:00pm already? Second thought: Prepare for the team’s FOMC session, but don’t plan to trade it given that (a) I specialize in morning rhythms and usually stink in the afternoons, and (b) I’ll likely be running on fumes by then … UNLESS the trades just “show up” and you get into a rhythm.
2:15pm - 3:00pm ET – As scary a 45 minute zone as I’ve ever been in, as the trades just started showing up – including the initial fade buy at 1131 (3 ticks off the low) a final long exit above 1142 (not the same trade but another one that I’d entered at 1137 and added at 38), a reversal short at 1143.25 (3 ticks off the high) and a final cover on the approach toward 1140 before exhaustion simply set in.
Apparently, I narrated to the team the whole time via audio as I do throughout the effort, but frankly don’t remember much about what I said. Although I do remember constantly thinking in terms of the traders on the other side of my trades as is always my focus when I trade alone.
3:30pm ET – Closed up shop and peeked at the P&L for the first time. Remember that scene in Trading Places where Lewis & Billy Ray glance at the final score when the bell rings and their jaws drop? Yea.
4:30pm ET – Hit the office sofa and didn’t wake up for 3 hours.
8:30pm ET – Didn’t plan on posting today, especially since I prefer to avoid discussing outlier wins. They happen, are expected, and as I keep telling the team … you have to act like you’ve been there before and will keep going there.
Yet after thinking it over, I decided to post anyway to continue to try to tell the full story about the journey of professional trading. Yes, there’s May 6. But there’s also September 21 and others like it … much of which remains purposely unspoken.
For as I’ve said from Day 1 of this public blog, this post and entire blog is not about me.
It never has been and never will be.
It’s about you.
And when you think about it, it’s actually rather simple:
When I (and you) sacrifice and work my (your) tail off, I (and you) win. Consistently and in abundance.
When I (and you) don’t, I (and you) lose.
It’s your choice.
And mine.
Often, once you figure out the game, 95% of the effort is simply showing up.
As I told the team today, I have zero problems sharing every iota of my strategy with every trader on this planet … with zero fear that doing so will ever affect my ability to trade or profit. I imagine that comment will go viral on the Internet trading boards quickly. Good.
For as I said in New York in February, it is a fact that the vast majority simply won’t make that extra effort to adapt to the market’s schedule or rhythm.
And that will be true as long as trading exists.
Last I looked, there is no “Easy Street” in the trader address directory.
If you’re looking for long-term success, I’d suggest checking “Sacrifice Blvd”.
But you likely won’t find anyone home.
For they’ll be out working their tail off.
Even if you call at 3am.
Have a pleasant evening.
Labor Day Notes – High Stakes Trading
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Reality Competition.
It’s everywhere and continues to multiply like rabbits.
Pick your sport … whether a traditional athletic sport, or the new age made-for-TV ”sports” of poker, dating, dancing, and cooking.
Heck, even cooking has multiple competitive shows including Top Chef, The Next Iron Chef, The Next Food Network Star, and Chopped … just to name a few.
So here’s my question. Why are there no reality trading shows? And by reality, I’m saying forget the CNBC junk or chatroom fiction where real trading actions and results are hidden by more smoke than a Mt. St. Helens eruption. I’m talking real, bona fide, live trading with REAL money & trading’s version of poker hole cams.
It’s an interesting question, especially considering that trading has arguably been one of the oldest true competitions on the planet. Yet the full range of industry media – from the traditional TV to ever-evolving ‘Net efforts – continue to focus on “analysis” and “entertainment”.
Oh I’m aware there are occasional broker-sponsored “cute” competitions … yet most of those are done with fake money.
Now some of you may be asking what any of this has to do with trading education.
In my view, everything … just as reality shows in other areas have fostered both awareness and education by having the best compete and show their methods for the world to see.
At this end, I’d welcome trading’s version of the highly-acclaimed High Stakes Poker televised cash game where real money (typically $200K to $1 Million of each participant’s own funds), strategies, and execution are all laid on the line for everyone to see … and here’s the kicker … to emulate.
Imagine 5-10 top traders all trading the same liquid market with a substantial bankroll over the course of a full week with total transparency, and with real results.
Many might run from such an endeavor or invite – some using the lame excuse guise of “it will render my strategy ineffective” (give me a break).
Yet I’ll go on record to say that I’d be among the first to participate in the interest of continuing to promote reality education by further tearing down the mystery and B.S. so prevalent in this industry.
Plus, it would be a world of fun.
The Weekend Trader Part 2 – The Wall Street Redemption
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Redemption.
I truly believe it’s one of the greatest gifts we’ve been given on this planet.
It’s an opportunity for us – as imperfect beings – to make up for past amends, errors, sins … you name it.
And while redemption of course an incredibly important – and necessary – aspect of life, it’s equally relevant to the game of trading.
For fight as we may, we’re all imperfect beings with personal weaknesses, limitations, and shortcomings.
At my end, the gap between perfection and reality is as wide as the Grand Canyon. Maybe even wider.
And while there’s not enough disk space on the Internet to list my personal shortcomings, somewhere near the top of the list is being far too intense … to the point where words and actions have sometimes been perceived by close friends, family, and business peers (including likely a few Jellies) as being downright off putting.
Yea, I know this isn’t exactly breaking news. Let’s just say after 50 years, you get to know yourself pretty well … and sometimes it just ain’t pretty.
Along the same line, I also tend to be a Go Big or Stay Home kind of guy, as the term “moderation” often seems as foreign to me as James Cramer giving a course on speaking softly.
I’ve often said that my oldest daughter – from the day she was born – never seemed to have a volume control … only an on and off button. Full speed or nothing. And it’s crystal clear which parental genes she got that from, as it sometimes seems that I don’t even have an off button.
For those familiar with the medical branch of homeopathy, it’s an Arsenicum constitutional personality.
So what has this got to do with trading? Well, for me, everything.
First, let me say that I’m truly grateful and appreciative of everyone reading this post, and for every friendship that’s stood the test of my being a royal pain in the a$$ at times. For I fully realize it’s not easy being “around” constant intensity … just ask my wife. And yes, I’ve likely lost a few friendships over time as a result.
Intensity of course has its place in terms of fighting for just causes, sparking innovation, spurring action, or – on the trading front – creating outliers. But as they say, there’s a time and place for everything.
I’m also grateful for all of the traders I’ve had the pleasure working with over the last 12 years, including the early Jellie teams who hopefully saw through the rough patches to see the genuine intent amidst the occasional drill sergeant antics.
Yet back to the trading front, the ever-present “all or nothing” piece of my personality remains one of my largest challenges in terms of trading goals, as the “what now” question (recall the October 2009 Catching the Rabbit post) often still eats at me.
Perhaps ironically, I’ve found that maintaining the highest level of interest in personal trading after a large degree of sustained success has turned out to my greatest trading challenge ever. Ever build a deck or finish a basement? It’s fun, challenging, and stimulating the first time, or even the second time. Then it becomes dull, boring, and monotonous.
I suppose it’s like a marriage … full of initial passion and spark, before becoming at times routine to a point where both have to work creatively retain the flame.
In a recent dialogue with Linda Raschke, I asked her if she suffered from the same challenge. Her response? “Every year.”
And that’s exactly how I’d discuss my “marriage” to trading.
The blog inception over two years ago? A spark to sustain the passion. The Jellie training and charity work? Another spark to rekindle the flame.
Next weekend, Debra and I will celebrate our 25th wedding anniversary on the beautiful shores of Newport, R.I.
Think about that for a moment … someone has been able to put up with me for 25 years.
Pehaps one reason it’s lasted is that we both realize – and accept – each other’s shortcomings … despite the fact they can drive both of us absolutely insane at times.
And it’s about constant moment-by-moment redemption.
With each other and with God.
Sort of like trading where one must live in a constant state of mental redemption that balances (1) retaining and learning from the past with (2) sole focus on the blank slate of the future.
Perhaps as we approach the fall season, we can use it as yet another opportunity to make amends for past sins, errors, indulgences, or misjudgments, while committing to once again reigniting that spark and passion.
In life and in trading.
The Weekend Trader Part 1 – Defense Wins Championships
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No one talks about it, and I’m still stumped as to why not.
Well, almost no one as Warren Buffet’s infamous “Rule #1″ speaks to it in spades. No surprise he’s been wildly successful.
Yet I suppose in a business that remains rampant with hype and the “I called the market right” syndrome (a.k.a. the “even a broken clock is right twice a day” theory), I suppose it should come as no surprise.
Here’s an exercise. Find your ten largest trading losses of the last twelve months. Then, remove any rare ”black swan” anomalies such as trading platform outages and the 5/6 flash crash over which you had zero control. The result should be losses over which you should have had some control. See my comment response for a further clarification as to the reasoning for doing this.
For many traders, the remaining sum - after changing the minus sign to a plus - likely totals a targeted annual income stream at one point in your career – i.e. earlier years for seasoned traders, or current targets for developing traders - that would have been avoided if you’d either not traded or cut back your trading.
Yet the popular trading “press” continues to ignore it.
And while stepping up the offense is of course critical to creating the necessary positive outliers, analyzing your ten largest losses will likely show you how very important playing defense can be.
Here’s a wild guess as to causes for the large losses:
1. Missed the beginning of a monster move and tried to make up for it by fading at inappropriate times and adding the the positions;
2. Had a losing day (which of course should be COMPLETELY irrelevant) and couldn’t bear the thought of booking a negative number so traded the hell out of the market and magnified the modest loss by a factor of at least three;
3. Just didn’t “feel” in sync with the market upon awakening, but traded anyway with no adjustment to sizes;
4. Wasn’t in sync with the market in the morning, so traded the lower-probability afternoon session heavily;
5. Saw other traders in chatrooms or in your office trading and doing well, and gave into peer pressure;
6. Saw the Dow was +300 on the day, figured that meant your P&L also had to be up nicely, and traded accordingly;
7. Went “all-in” on day two after having a monster win on day one … giving back your prior day gain by at least 50%;
8. Forgot (or didn’t know) that it was more than OK to scale out of a losing position versus barfing it out in a single projectile at the retail extremes (I know, great visual);
9. Doing your best Mortimer Duke impression by fading an extreme trend after 3:45PM ET on a Friday looking for a full reversal, somehow thinking the market may stay open another four hours just so you can cover at better prices. One of my earliest crushing bonehead losses … somewhat appropriate given today’s market close which was Exhibit A for our mandatory no-fade rule after 3:45pm.
I could go on, but you get the picture.
And in every case, reducing your trading activity (playing defense) would have saved the day.
Why might it seem I’m staring at your trading diary from your losing days? Because I’ve done them all.
Thankfully, most were earlier in my career.
In ten days, the incoming Jellies will hopefully learn SOOT defense in spades.
Defense via size adjustments. Defense by simply watching the market play offense before tiring and becoming vulnerable to the wholesaler. And defense when personal fatigue sets in … regardless of the market action at the time or what “other traders” are doing.
In doing so, the idea is to get them thinking strongly about the adage, “a penny saved is a penny earned”.
And in many cases, it will be a full year’s worth of pennies.
Wednesday Notes – Time of Day Management
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Please refresh and re-read due to earlier posting errors.
One of the advantages of my order entry platform (X Trader from Trading Technologies) is the ability to have all of the trade data input to Excel live throughout the trading day without my having to do any downloads.
In addition, I worked closely with one of the Jellies (many thanks to John) recently to create a comprehensive statistical and trade sequence tracking package that met my (NOT the non-trading programmer’s) specifications.
One of the elements we programmed was an automatic time of day profit analyzer that calculates the profit or loss by 30 minute interval in bar chart fashion.
And like a picture, the resulting chart (today’s is attached … click to expand) often tells 1,000 words.
Note the times reflect the beginning time of each 30 minute period.
In my case, I’ve even gone so far as to highlight those intervals in beige where I’m traditionally not that strong, or that have caused problems in the past – which in my case includes the opening 30 minutes of the Europe session, the 9:00AM-9:30AM ET transition phase between the overnight and normal sessions, and the post-2pm period where I rarely trade due to a combination of fatigue and often (but not always) far lower probability trades compared to the earlier sessions.
In today’s case, the chart reveals that I chose to sleep in a bit and pass on most of the Europe session, traded the early U.S. session, and then pretty much shut down for the rest of the day except for a few very small sequences late in the day after I’d napped a bit.
Generally speaking, today’s chart is pretty typical to that of most days in terms of activity levels during the various times of day, although as I’ve said recently, I’m sometimes much more active in pre-9:30AM session if the prior day U.S. session or current day Europe session sets up accordingly. And of course, all intervals traded are not always profitable … duh.
In terms of the post-2pm period, I know many traders who trade the afternoons well.
Yet of the millions I’ve made in this business, I firmly believe that I’m net negative after 2pm for the reasons I mentioned above.
And in this business, knowing and avoiding your personal landmines is sometimes all it takes to avoid undoing that which you tend to “do” well.
For anyone can make good trades.
Yet few can retain and grow the accumulated capital.
Tuesday Notes – Random Thoughts
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Some random trading and non-trading thoughts as the summer trading season continues to wind down.
Less is More – ES continues its summer rhythm of outstanding and very readable Europe (pre-9:30am ET) session opportunities, followed by more limited opportunities in the U.S. day session which continues to be characterized by early dogpile in/out moves and then several hours of limited chop.
As such, my trading sequences and volumes have tended to mirror that of the opportunites presented with my heaviest trading being before 9:30am, followed by modest early U.S. session trading, and then SOOT preferences after 11am ET. Overall personal trading volumes continue to be light at under 1,000 total daily contracts traded.
After Labor Day, I suspect the pace will change a bit as the overall volume and flow of the U.S. day session picks up.
Personal Schedule- Several major non-trading events are on the calendar over the next two weeks, including helping my daughter Chelsea move into Tufts University next Wednesday, and then celebrating our 25th wedding anniversary on Labor Day Weekend, before kicking off the final Jellie training session on September 7th.
A reminder to all former Jellies that you’re invited to attend the three Monday evening sessions, which this time around will include trader psychology segments by Robin Dayne.
My main focus remains on continuing to strengthen the mind & body from my bout with pleurisy, which experts have told me takes 2-3 weeks to run its full course. And as is the case with trading, timing is so critical and I’m extremely grateful that I was hit with this in August vs. September.
Schindler’s List – While continuing to recover and SOOTing this afternoon, I finally watched Schindler’s List for the first time. It certainly puts trading and minor health nuisances in perspective, and has given me new personal meaning to Chelsea’s farewell solo of the theme a few months ago.
Any attempt to further describe my feelings on the events as depicted in the movie wouldn’t do the atrocity justice.
Friday Notes – Focus on Focus
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I didn’t trade alongside my Jellie peer traders today.
For I made a conscious decision to simply focus on today’s MATD in solitude, and - to use a golf analogy – finished this week’s trading “round” by going birdie-birdie on Thursday and Friday on the heels of the mid-week bogeys.
So what happened since Wednesday’s “going to put the car in park” post?
Two things. First, the market provided classic TD (Trend Day) – MATD sequences on Thursday and Friday, which is about as obvious a pattern in this business as there is. And whether I was fully recovered or not (still getting there), it would have frankly taken a coma to mess it up.
Second, and as I’m sure other traders will attest, it’s not surprising that once one sets his/her mind to not trading, trade setups and optimal wholesale entries just seem to fall in your lap. I’ve seen this time and time in my own trading, and it’s largely because any self-imposed pressure to perform is magically lifted. The result is that “too early” or “too late” often morph into “right on time”.
In terms of trading solo, it was a change of pace that everyone probably needed. For me, I tend to get into some bad habits of babbling instead of trading more aggressively when in the networking room. And while additional sets of eyes can be helpful when one gets tired or unfocused, the charts will always provide everything you need in terms of price action.
For the team, they probably enjoyed the relative serenity after my Thursday rant.
And such are the risks and benefits of group trading. As I’ve mentioned in the past, there are significant pros AND cons of group trading dynamics, and I’ve long been hot and cold on this topic.
There’s a reason I emphasize self-sufficiency in one’s trading, which in addition to not wanting people to pay me some ongoing revenue stream (I make nothing from the ongoing room) is in part because the last thing a good golfer needs while putting is 15 caddies reading the green when you already know how to read it. You focus on the putt … and nothing else.
Perhaps the scenario that best balances the two is to use such a support system as an occasional booster shot or check and balance rather than a continual tool which can become a harmful subconscious ”crutch”.
Lastly, I wanted to share an email response I sent one thoughtful onlooker last night who was concerned that I might be losing a bit of life perspective in terms of recent posts and events:
Hi and thanks for your heartfelt note.
It is definitely true that I’m driven in all that I do, and that some day, I’ll likely step down from the trading arena (or maybe they’ll have to take me out screaming).
As you probably know, trading is much like athletics in that careers can be short, and as such, we must push hard during those fertile times in our careers. This is especially true because we have no pensions or retirement vehicles other than to self-fund 100% of our future need, and as such, we must work harder than other professions to fund both current and future needs. And such is likely evident throughout any trader’s approach.
Having said that, you’re entirely correct in that I can be fully absorbed to the point where some may think that a deeply-held passion may be bordering on obsession. Yet for me, it’s never been about wealth accumulation. Never. Instead, the challenge of trading and teaching others remain passions of joy and giving, much like it was for Larry Bird when people asked him why he was so obsessed with getting up at 4am every day to shoot 300 baskets. His response was that he simply loved what he did.
Yet your words ring true in terms of stopping to smell the roses … something that I can always get better at.
God is still working on me.
Thanks again for the thoughtful words.
Don
