Wednesday, December 31, 2008

Final 2008 Post - A Night to Dance

And so it is over.

My personal 366-day inner journey to try to discover my true trading potential has finally ended, with the final tally reading +$1,635,103 and +214%. (See earlier post for today's recap.)

Tomorrow, a new day will dawn, a new year will be born, and we'll get to start over. 2009 won't care about 2008 just like today didn't care about yesterday and tomorrow won't care about today. We'll all get a do-over ... a mulligan ... another chance to wipe the slate clean and make fewer mistakes than yesteryear. At this end, I've ended this particular journey and will trade largely for enjoyment as the year begins.

Yet for one night, we'll dance. We'll freeze this ever-so-brief moment as long as we can and dance away tonight like tomorrow will never come. We'll stand in awe of the magic of a fully matured Bamboo, which will forever remain a testament to Man's ongoing battle with patience, fortitude, and endurance.

About this time last year, more than a few people thought my million dollar mission for 2008 was impossible. "Foolish", "Absurd", and "Too old to compete against lightening-fast program traders" come to mind. As the year went on, some even wanted to see me fail ... badly. Then, as the tally began to grow and initial targets surpassed, a few questioned whether the results were real, while a small minority tried to take away my spirit in various creative ways.

Then even the market seemed to get angry as it tried its darnedest to shake all of us to our very foundation in the fall. It bucked and screamed like some monster straight from hell, even trying to kill my personal spirit with a $94K flesh wound that momentarily knocked me below my target. It spit in my face. The market then tempted me to push hard in December when I was physically and emotionally spent while at the same time drastically changing its own rhythm to try to trip me up. It was trying to put me on tilt to give up the hard-earned gains. Another spit. It was getting intensely personal.

Yet I owe all of them my deepest thanks. For they simply strengthened my resolve, which when combined with the tremendous outpouring of blog support over the last six months, simply made losing a non-option. And while the market can't ever truly be defeated, like Rocky in his final movie, I somehow managed to stand toe to toe with the Champ until the final bell. I'm leaving the ring standing, thanks in part to my decision to slow down in mid-December, which in hindsight was 100% correct.

And I had help. Big help. For I've seen and intensely felt God's hand this year ... both during the good times and the struggles. For those turned off by talk of faith or religion, all I can say is that this 2008 story simply wouldn't be complete without the full and accurate picture. I doubt a lot of things in life. I don't doubt this.

Regardless of what happens in 2009 and beyond, no one will ever be able to take 2008 away from me. Ever. Like other far more important life milestones, the year will find its own place in a corner of my heart that I'll be able to tap whenever I question my ability to conquer a challenge in front of me. The funds will be well-protected and socked away, and a new game -- in whatever form it takes -- will begin.

And if you haven't figured it out by now, this blog goes far beyond my trading race. It's about life's race. Trading is a game ... nothing more. It pales in comparison to life's true priorities, and simply provides us with the analogy of all analogies, and parable of all parables. It provides us with a unique practice field on which we can learn and then try to apply the principles to life. The better we trade, the better we live, and the better we live, the better we seem to trade. For me, the $1.6M score will mean nothing unless I can now apply the learned principles going forward, especially to life.

If you're reading this, then you're still breathing and I congratulate you. I don't have to tell you that life is sometimes hard. 2008 has punched many in the gut, and a lot of blood has been spilled in the form of lost jobs, foreclosed homes, and industry corruption at every turn. My punches just happen to come in earlier years, and only infrequently in 2008 as fully chronicled for all to see in this deeply personal diary.

Tonight, we all dance. In part for the joy of personal victory, but for all, the survival of 2008 and the possibilities of 2009. And at midnight tonight, I'll drink a toast to all who have joined me on this year's journey -- even if you're simply a silent onlooker or one of the small minority who may have initially questioned my motives and integrity -- and to all who made it through the year, even if kicking and screaming or temporarily wounded. You made it. And you're a year smarter.

I encourage you to consider printing this and putting it someplace safe that you can reference if you ever get down, or if someone ever tells you "you can't". Because they're dead wrong. If you're breathing, you can and you will. Regardless of what the pundits say or how much the temporary pain may sting, don't ever let anyone take away your spirit and joy for life. Who knows, 2009 may very well be your personal Bamboo year. And if you still need a hand, contact me.

So long 2008. Welcome 2009.

Happy New Year.

Wednesday Notes - And Then There Was ...

4:15pm Continued light volume amidst a declining VIX was the main theme for today before the final semi-frantic settlement action toward the close, resulting in another slow ES crawl to the north for the most of the day.

And with most traders remaining on the sidelines for the holiday week, the pace remained suspect at best with no clear shot for me to put on size on the anticipated early morning oscillations ... which were fairly shallow given the light volume (one of my concerns as I mentioned yesterday).

As a result, I again kept things light at 1,066 contracts traded for a nominal day's chip gain of just over +$2K and a monthly tally of $52K (lightest of the year). The monthly charts to the left have been updated to include December's data.

I do find it interesting that even though the VIX has" imploded" to below 40, ES remains trading well within its December range ... not exactly a lights out performance.

And so at 3:51:15pm, I closed my final trade of the race ... not surprisingly, a short scalp using the 1-minute ES and TICK charts.

While leaves me with one final post of this historic year ...

Tuesday, December 30, 2008

Tuesday Notes - One ...

6:00pm And then there was one.

So is this how it ends? A closing afternoon trend setting up the infamous morning after trend oscillation sequences? A morning pattern that has accounted for a good chuck of this year's Bamboo trunk? Could there be one last trade setup before Old Man Time (2008 version) officially leaves the stage?

First things first: In terms of today's trade, I continued to take it light (582 contracts ... a.k.a. tiny), nibbling from the long side with the VIX and five minute trends at our backs in the morning for a nominal chip gain of just over +$1K. And while volume was "slightly" better than yesterday, that's like saying Brett Favre had a better game last week than the week before. At this end, my interest remained luke warm in light of the low volume, sporadic pace, and complete lack of trader emotion as evidenced by the VIX which could actually tick under 40 in the morning. So we'll tip our hat to the investors and swing traders long the market today (we can probably count those days in 2008 on one hand) and get ready for one last round.

And now all eyes turn to tomorrow, and my goal is simply one or two strong sequences before ending the 2008 race once and for all. It's been quite a while since we had the closing afternoon trend to set up the morning trade, so tomorrow should provide one last bite at the apple ... assuming -- and this is key -- that there are enough traders active in the market tomorrow who are either stuck with short positions or ticked off at missing the last 15 minute 8-point climb.

This market actually reminds me a bit of the early fall, as traders had to make a mental transition to record volatility, except on the flip side as the same traders try to make the transition to a rather unemotional creeper market without inflicting too much damage on themselves as the market changes yet again.

And when the bell rings at 4:15pm tomorrow, I'll post my final thoughts on the year ... much of which I wrote last night as I reflected back what was a historic year in many ways. It will be a very special time of personal reflection for me, and I hope it will be inspirational for all who have joined me on this journey.

Yet until then, there's one more step to take. In many ways, tomorrow will just be another trading day. For some, it will be an important portfolio window dressing day which typically accompanies the last day of the quarter and year.

For one trader, it will be the culmination of a decade's worth of preparation and 366 days of sweat and toil.

I'll see you after the bell.

Monday, December 29, 2008

Special Post - 2008 Year-End Grades

Time to hand out year-end self-grades for this trader.

2008 Report Card
Student: D. Miller
Grade: 10th Year
Age: 47
Major: Short-Term Market Trading

Patience: C
Student occasionally enters too soon and doesn't hold strong entries long enough. He also seems a bit over-eager at times to get started in the Europe and Globex sessions when his success clearly has historically been accomplished in the U.S. day session.

Focus: B
Student is sometimes distracted by non-market obligations, which while they can't be eliminated, can be managed better at times. Also, twice during 2008 he should have cancelled non-market activities for markets that were primed to move strongly, and as a result he incurred significant market opportunity cost. At other times, his focus was intense as was the case during much of Sep-Nov, especially after initially getting knocked around. His focus certainly did drop after the first week in December, yet I can't fault him too much and he did well to avoid major damage by scaling back.

Dedication & Commitment: A
Student showed strong dedication throughout the year, intensifying efforts even further in July with the launch of his blog which helped him keep his mind focused on the 2008 task at hand. He ate, drank, and slept with the market in 2008. This is the highest grade I've given him in this category since I've known him.

Adaptability: B
For the most part, student adapted well to changing markets and his own rhythms, although sometimes at some high initial cost which prevented me from grading him higher.

Tenacity: A
Student never gives up. Ever. When he finally goes, he'll definitely go kicking and screaming. This was probably the greatest reason for his 2008 results.

Plays Well With Others: B
Student did well to openly share his ongoing struggles and successes throughout the year with the public. And while I would have graded him higher if he didn't babble so much about the dark side of the industry, I have a strong feeling he'd rather accept the B.

Overall Potential - Incomplete
Tough to say. Student seems to have some potential, but he has to learn to stay out of his own way at times. He definitely still needs some work.

Suggestions for 2009:
Have some fun in 2009 and don't take life so seriously at times. The market will still be here in 2010 if you want to run another race. Also, don't take yourself so seriously all the time ... no one else does.

Special Post - 2008 Day of Week Stats

Have I said I hate Mondays??

Take a look at the attached P&L chart by day of week (click to enlarge).

Yup, that's a net loss for the year on Mondays, which as I alluded to in today's earlier post, frankly isn't a surprise. Even adjusting for the single-day $94K loss that's buried in the Monday figure, it would still be dwarfed by the other four days. (btw, the largest day 9/18 gain is buried in the Thursday figure). Talk about needing to get your motor running!

Note: The total of all bars is slightly less than the true profit before overheads, as early in the year the CME booked member commission rebates monthly (vs. daily) which I didn't at that time allocate to day of week. The general trend is the main concept here.

Seriously though, it's again not much of a surprise as I've found that it often takes some time after the weekend break for both the market and this trader to establish their respective rhythms for the week before the cheek-to-cheek dance can begin in earnest.

The % of profitable days by day-of-week also tells a similar story:

Mon 65%
Tue 77%
Wed 78%
Thu 89%
Fri 85%

Again, not a shocker as the week's dance often builds to a crescendo on Thursday before settling down a bit on Friday. Yet before we consider printing the "Work One Day a Week and Make $600K" book, I again stress the stats simply are what they are and it makes no sense to try to manage "to them". For after normalizing for the one large Monday loss, the day would still provide incremental income ... albeit at a lower rate than other days. And as with anything printed in this diary, the patterns also simply reflect the internal rhythms of this one trader.

Yet thankfully, today was the last Monday of 2008.

Wake me on Tuesday.

Monday Notes - Two ...

5:02pm - Low volume and a putrid pace were major themes early today as the year-end Holiday trading pace continues. Said another way, today felt like stop and go traffic on the Boston expressways where drivers floor the accelerator, slam on the brakes and wait in traffic, and then repeat the sequence over and over as they wear out their brakes.

I actually traded somewhat similarly and incurred some cost of brake pads (multiple early scratches and transaction costs as I provided some market liquidity on the early morning drop) before finally settling into a bit of a midday and afternoon rhythm. The result was essentially a scratch on the day on just over 1,500 contracts traded, but the box score will show a nice comeback and strong reads on shorting the midday trend pullback.

The early climbing VIX kept me from doing too much on the long side and I did take an initial short once the early range broke to the south, yet I was surprised that there were so few retracements as the volume was extremely low which is often the recipe for some tradable chop for the locals. Essentially, I was looking to trade with the short bias, yet provide liquidity by selling pops and covering drops. Instead, the market served up a slow bleed.

So today, the positive speculative pattern-based trades and cost** of liquidity-providing scalps pretty much evened out at this end. And before the mailbox floods with "why would you trade long within a short bias?", it still often pays for locals in a low volume market, provided the market is serving up a half decent ebb and flow rhythm ... which obviously was absent in hindsight this morning. My focus remained on somehow getting short on a sharper pullback, which we finally got midday.

** I say "cost" because that's what I consider "losses" in this business ... a necessary cost of doing business. Cost we can strive to minimize, but never eliminate.

I sat out much of the late afternoon climb, opting to simply let the midday comeback stand and reduce the magic number to two.

I've updated the figures to the left, which barely moved, and will post more thoughts tonight including 2008 statistics by day of week ... which should be interesting as I expect Mondays will look pretty horrible.

Sunday, December 28, 2008

The Weekend Trader - Three ...

And then there were three. Some thoughts heading into the final trio of 2008 sessions.

Foxwoods Recap - 'Twas a very interesting day yesterday as I continue what I consider time in my poker "simulation tank" of $1/$2 no-limit cash games. I say simulation because I truly view it as a continuing training ground for me before -- if ever -- I decide to up the stakes, similar to trading simulations for apprentice traders. And like trading, I believe in real money, heat-of-the-moment experience as the best teacher ... not conceptual B.S.

Suffice it to say that I sat down at noon with the maximum buy-in of $300, and then spent the next 8 hours and five minutes trying to manage with horrendous starting cards. And we're talking consistently horrible as in 2-6, 3-8, 4-10 ... not even potential "buster cards" which are often the big winners in cash games like low suited connectors or something resembling one has a chance.

In fact while I'm typically the quietest one at the table (always trying to follow the table "class" example that Barry Greenstein, Allen Cunningham, and Mike Baxter show) I remember saying in the seventh hour, "I'm beginning to think it's statistically impossible to get the cards I've gotten for this long a time." And yes, it absolutely reminded me of recent December days where the market has also been dealing 2-6 over and over again.

Anyway, I think I handled the day well, getting to see occasional cheap flops where I might be able to make something out of nothing, or bluff on the river if I was still in and figured someone else missed their draw. So for most of the day, my chip stack floated from $200 - $300, and I actually managed to take a few pots down to cover some of the cost of feeler bets.

Then, at 8:05pm (I know the exact time because I purposely looked at my watch), I finally made the nuts that also happened to take down another strong hand ... Ace high flush besting a King High flush. And I felt I played it well, disguising my hand (which hit on the turn, as did his) by just calling the better on the turn (risk of losing to a full boat at that time was low), and then putting in a nice solid value bet on the river that he called. That pushed me to a little over $400, at which point I almost left.

Instead, I decided to play just one more hand (hello Archie??) as I had the opportunity to see an unraised family pot flop for just $2 with Q-5 of spades. If it didn't hit, I'd be gone. But then the flop came Q-5-6, which was checked all the way around to me where I bet $40 wanting to take it down right there. Everyone folded, except one who raised me all-in for his last $115.

Now the first thought I had was from someone commenting in a prior post who said "never go broke with 2-pair". And I'm well aware of the danger and false sense of security that two pair can bring. Yet after thinking it over for several minutes, I put him on either a Queen, 5-6, or a straight draw. I discounted a pocket overpair or even 5s or 6s for possible trips as he didn't raise pre-flop, ane even if he was slow playing the overpair, I'd still have him with the very unusual Q-5 two-pair. I also felt he was simply getting ready to go home. And since I had him well covered, I decided to call.

Well, he also turned over Queens up, except his was Qs and 6s ... besting my Qs and 5s. Go figure (comments appreciated ... it still seemed the right thing to do, and that was one hand I couldn't put him on ... just like I thought no one could put me on Q-5!). btw, if he had a larger stack and had gone all-in, I'd have folded.

And after no miracle 5 rescued me on the turn and river, I called it a night and went home down exactly $36. Yet all in all, I was pretty pleased with my play in that I had very few opportunities, and held my own for eight hours. Which brings me to my next thought ...

The Candy Store - Steve Zolotow had an excellent piece in the December 31 Casino edition of CardPlayer magazine ... which I of course was reading while getting dealt nothing for eight hours .. entitled "The Candy Store Isn't Always Open". Even if you don't play cards, I encourage you to get a copy, which contains the following excerpt:

"In recent times, poker has been booming. Right now, the poker candy store is open. But don't be fooled. There will always be poker, but it won't always be this good. If you are making a lot of money playing poker, try to hang on to it, or better still, invest it. Don't blow it on (he lists several things) ... thinking the candy store will always be open. It won't. Games will get tougher."

And he goes on and on, making several great points including the fact that participants get smarter, games change, and that you should protect yourself from thinking that you're a great winner and that you can do anything since you can always win more.

In 2008, the market was a candy store for some of us. For others, prior years were candy stores before 2008 turned into their personal horror show as strategies that had "worked" for decades came to a crashing demise as the VIX surged to 40, 50, 60, 70 ... and then over 80 forcing liquidation after liquidation. My broker has repeatedly told me that many historically strong traders got obliterated this year. Yes, traders.

Even top CTAs rarely repeat year after year. In looking back at the top ten CTA trader returns published by Futures Magazine over the last few years, only two traders listed in the 2006 top ten for managed accounts < $10M repeated in the 2007 top ten, and only one appeared in both lists for accounts > $10M. It will certainly be interesting to see how 2008 shakes out when the final CTA #s are released in early 2009.

Those of us that were fortunate enough to be able to quickly adapt to the historic market conditions on the fly and prosper this year should heed the closing words of Mr. Zolotow, "Make a new year's resolution to do something constructive with your winnings."

And as a result of my stumbling across the article, yesterday may be the best $36 ... and eight hours ... I've ever spent.

Saturday, December 27, 2008

The Weekend Trader - Four ...

Some Saturday morning thoughts before I head to Foxwoods to continue to brush up on my cash poker game (which as I've stated in turn strengthens my trading).

By the time I return from the 'woods late tonight, the countdown will be down to four days. And I view is as a critically important four days, but not for the reasons you may think.

Sure, I'm currently finally allowing myself the briefest of celebrations which will culminate Wednesday evening at 11:59:59. Those that have known me over the years know that "celebration" is practically a foreign word to me, as 99.999% of the time I only care about tomorrow. Yet I think even they would understand why I might be briefly stepping out of character when the ball finally drops this one time.

But that's when it ends. And begins. And the new beginning will mandate that I spend as much focusing on losing most of the 2008 memories over the next four days as I do allowing myself one brief glimpse backward. No, make that even more.

So what memories do I filter out of the memory bank and which do I keep? It's actually pretty simple if I look at how I typically approach each new trading day: Take the painful or otherwise constructive ones, and lose the rest.

Memories to Retain - OK, let's look at the constructive ones. There are more than enough things I did wrong in 2008 to keep me focused on trying not to repeat them. If you're new to the blog, simply check out last week's video documenting some of the 2008 errors. Warning: you may want to hold off eating until after you watch it.

And I'll add two more. Looking back at P&L by traded instrument, my Europe trading was barely positive before commissions and undoubtedly negative after considering commissions (FYI, I track daily gains & losses by instrument, but commissions only in total). Imagine. $1.62 Million, countless hours of lost sleep trying to trade Europe, and a net loss buried in that number.

Even worse, while I don't track P&L by time of day, I guarantee you that my overnight ES Globex session trading was also net negative and I incurred some of my largest losses then. So I should cut both of these areas completely out of my trading in 2009, right?

Before I answer, and as I've stated before, the huge unknown is how the losses positively affected my day session ES trading. And yes, I say positively because I know myself well enough to know I trade far better when slapped in the face and in the "comeback" mode that became my cornerstone for 2008 and beyond. So I would argue that more than some of those losses fueled the competitive fires that, in total, resulted in the 2008 Bamboo. And frankly, "in total" is all I care about.

So will ripping out the Europe and Globex session trading be like blasting out that ugly boulder in your front yard before realizing it was part of a strategic ledge that kept your house from falling into a sinkhole?? The answer is of course unknown. Yet suffice it to say that I'll be backing off from overnight trading significantly, at least for the first part of the year.

What other thoughts do I want to carry into the new year? Aside from the constructive pain, the only one I can think of is confidence. I've preached for years that I view confidence more important than my trading capital. Lose your capital and you can find a way to get more. Lose your confidence, and it doesn't matter how much capital you have ... you'll lose it anyway. Yet it has to be "confidence" ... not "cockiness". Confidence that in the long run, you can overcome any barrier presented if you work hard enough. Confidence that is critical during those bad beats and losing streaks that will always accompany this business.

Memories to Forget - OK, what thoughts do I lose? Easy. The wins and amounts. On 1/1/09, the $1.6M gets mentally reset not only to zero, but below. It's yesterday's news, has zero bearing on the future, and I have to believe it was a year full of miscues [which of course is partially true].

And I fully realize that 2008 may also be an outlier, especially given the historical year that presented record volatility which perfectly suited my style of fading extreme emotion. So I can easily consider the fall of 2008 as the "Perfect Storm" from a trading perspective. With apologies to those long the market in the investment community as my comment is strictly related to trading where the higher the volatility, the more fertile the ground for seasoned traders relying on continual price movement.

Said another way, if you look back to the daily profit distribution chart in the statistics post and simply pretend the bars reflected the number of years (instead of days) with certain results, I could easily consider 2008 an outlier to the far right. So we simply accept the year (vs. day) for what it was, know that every year (vs. day) won't be the same, and move on.

As I said last week, I frankly don't remember the 2008 gains, perhaps because that's how I've programmed myself. Even when I typed Tuesday's stats, I had to fairly quickly disregard the mention of the largest gain of the year and move on.

Some may say I have this completely backwards in that I should remember the wins and forget the pain. And that might work well for them. All I can say is know thyself. We're all wired as unique individuals and motivated differently. At my end, I need to remain humble and remember the pain -- real or imagined via the cornerstone chart -- to fuel any shot of my performing well.

So there it is. I need to have a very selective memory and do some major filtering before Thursday arrives. It will still be the year of the $1 Dollar goal, but the general premise when I do choose to trade can't change.

Fortunately, my wife would likely say having a selective memory is one of my strengths.

Enjoy the weekend.

Friday, December 26, 2008

Friday Notes - Five to Go

3:00pm And then there were five. Five calendar days to the ball drop. Three market days.

'Twas a light day at this end today at 180 contracts for just under a $1K chip gain by providing market liquidity on a couple of sequences as the market barely moved. Essentially, I gained the spread ... nothing more ... yet kept the ever-so-slight recent momentum heading in the right direction by ending the week in the green and avoiding having to update Tuesday's statistics to note a 3rd December week in the red.

Yet my interest remains on protecting the work of the first 361 days before closing the book for good on Wednesday. Certainly not a tough feat during the Holidays, but then again perhaps that's what Archie Karas was thinking as he was attempting to walk out the casino door with his bankroll before his mind-numbing demise. Strange things can and do happen. Lest we forget the Giants upsetting the Pats and the miracle helmet catch a year ago.

361 days down, 5 to go.

After that, we'll stop the recent brief lookback at 2008 and focus on the new road ahead.

You can bet your bottom dollar on that.

Please note I'll post the updated trailing stop data in the left hand margin rather than keep repeating it here.

2009 - Year of the $1.00 Dollar Goal

What Now?

Yup, that's the question heading into 2009.

As many know, this blog was a personal experiment. An experiment to determine what the impact of using a detailed trading journal -- a public version open to those who stumbled across it and complete with real "chip gain" commentary -- might have on this trader's results. An experiment that took on interesting characteristics as the market decided to take the industry on a wild ride never before seen in the world's history, as I tried my best to document my personal struggle to keep up with it. An experiment that evolved into a unique dialogue as the numbers of those watching grew daily.

In five days, the 2008 journey and experiment will be over. Based on both personal results and onlooker feedback, the experiment was a success. Which brings us to 2009.

As I was writing yesterday's post about trading income simply buying "time", it dawned on me that I should take advantage of some of that "time" before the number of gray hairs begin to outweigh the brown. So I'm going to take a different journey in 2009 ... one that seeks to increase the "fun" factor. (OK, yes trading to me is fun ... but we're talking about a different kind of fun.)

Said another way, if 2008 was the year of pressing myself harder than I ever had, 2009 will be the year of getting 8 hours of sleep a night, trading far less frequently, and spending more time with my wife and non-market priorities. There will be no pressure, no daily reference to chip gain or loss (although the blog itself will continue for now), and I'll actually even spend a portion of any trading profits realized in 2009. (If you're interested, I've socked the '08 funds away for my kids' college and personal retirement funding, and have spent zero.) And if I end the year with $1.00 in profits (that's one dollar, as was the infamous bet in Trading Places), the year will have been a tremendous success so long as I met my enjoyment goals.

As an aside, this may actually be good news for some vendors that would like me to simply go away, as the last thing they want to hear is public babbling about self-sufficiency during a time when many of their subscription-based businesses have been shattered and are under increased scrutiny. Although it's somewhat ironic that a simple personal trading diary would touch off such emotion. Clearly though, the industry is watching.

Yet as I've stated before and to set the record straight once and for all, I think trading teachers and resources who are honorable and promote self-sufficiency serve a very useful and needed role in this industry ... and frankly, their numbers are sorely lacking.

The best analogy I can think of is when I used to seek out chiropractors for a lower back problem. Some had credentials and ethics ... most didn't. Many who I stumbled across wanted me to see them a few times weekly for an adjustment. Then I found one who simply showed me how to realign my pelvis using pillows and also provided a strengthening exercise guide. I spent a lot of $$ and incurred a lot of frustration before finding that doc who gave me the needed insight and push ... but then who backed off and told me I really didn't need him!

I'll be interested in how the change alters my views on trading during the new year ... if at all. For example, I may find the competitive drive is mandatory for me to do well. I may also find taking it easier does even better (highly doubtful though). On the other hand, I may find I instead want to simply move on to another life challenge (I haven't completely ruled out attending the 2009 World Series of Poker).

I actually thought briefly about fully retiring from competitive trading. Why consider going out near the top of one's game? Perhaps it's some boredom after accomplishment of one's goals. Many far better than me in their own fields have done it, including Annika Sorenstam, Justine Henin, Barry Sanders, Ken Dryden, Sandy Koufax, Bjorn Borg, and Michael Jordan (especially when he first "retired" in '93 when he was only 30) to name just a few.

Yea, I know the physical demands of athletes are different and lead to shorter careers vs. traders who could sit in front of a terminal into their 60s and beyond. Yet the mental demands are no different, and perhaps even more intensive given there's really no trading "off-season". After all, how many 250+ game seasons are there in professional sports?

And so next week I'll begin 2009.

We'll go from the year of the $1 Million goal to the year of the $1 Dollar goal.

Regardless of what happens, it should be "fun".

Thursday, December 25, 2008

Special Christmas Post - My Gifts to You

I've said in the past I'd never want my children (or their future spouses) to become traders. The probability of success is simply too small and the pain is usually too great. However, if they made up their minds on their own and asked for my help, I'd take a deep breath and do whatever I could to support their efforts.

So it's in that spirit that I offer the following modest Christmas gift nuggets to those looking over my shoulder and who have already made their own decisions to pursue this crazy business:

1. Become self-sufficient and ignore what the screaming hype-driven world is telling you. In the Christmas spirit, I won't start my chatroom and advisory service bashing. Yet suffice it to say if you're looking for someone else to tell you what to do or confirm your thoughts -- especially in real-time -- it's either already too late or will result in an unsevered umbilical cord that becomes harder to cut over time ... and quite possibly linked to the wrong host. Remember, those confirming "experts" have their way of trading, often won't risk his/her own capital anyway, and/or carry their own emotional "baggage" as we all do.

I find it interesting that we all learned how to breathe on our own with nothing other than a spank. So shouldn't we simply prepare to get spanked and learn how to "breathe this business" without a paying for a useless ventilator? Yes, it may result in more short-run pain, although that's arguable. I frankly only care about the long run and want to put trading profits into my own pocket.

2. Develop a feel for the market. I read over and over again that "you can't trade based on feel". Bulls##t. The reason you hear that is it's hard to sell books, advisory services, and chatroom subscriptions that way. Develop a feel for the market's pulse, and then use the indicators simply as confirmations. Remember that scene in M*A*S*H where Hawkeye was blindfolded after an eye injury and still found the perforation by simply using his intuition and senses? That really pissed Frank off if I recall.

Is it hard and time-consuming? You bet. You think this year was easy?? Or asked another way, How bad do you really want it?"

3. Find some way, some how, to have a non-trading income to pay the bills. Yes, I have one and it's completely non-market related. And yes, it makes a world of difference. Primary options include (1) spousal or significant other income, (2) a side job that doesn't "materially" interfere with market time (there will always be some interference, so the benefit of the income has to outweigh the cost of interference), and (3) income on past investments. Yet there are many innovative ways to go about it. Find it. Find that annuity stream.

4. Fully immerse yourself. Yes, I may have gone overboard this year and I'll likely never push myself again as hard as I did. Yet there's a reason for the results. If you really want to do this right, live, sleep, and dream the business. Again, how bad do you want it?

5. Remember it's all about "time", which is all trading income or losses really buy or spend. The only thing I really accomplished this year is I bought about 15 years of income at a decent standard of living. Time to spend as I choose. Nothing more. Have a loss this week? Big deal, so you're a week younger. And more importantly, likely a week smarter.

I had two choices after incurring the largest single-day loss of my career in early October: Whine and cry; or use the market information to my advantage. I chose the latter, pressed the newfound advantage hard, and within 4 days the wound had fully healed. Then, within a few weeks, it turned out that what some may have viewed as a devastating loss simply was forming the necessary foundation for a record month. Had I not been hit as hard, I probably wouldn't have noticed the new screaming market data.

6. It's also all about probability. Probability that you're on your game. Probability that the pattern will pay. Probability that you're in the right place at the right time. Probability that the guru will be right (sorry, couldn't resist), and probability that after a decade of work, the Bamboo will finally break the surface.

I don't normally give advice in this diary. Then again, I suppose this really isn't advice. It's simply a few of the ingredients I've used in cooking this year's Christmas feast.

So perhaps we're safe.

Wednesday, December 24, 2008

... And to All a Good Night

11:32am Please change "0" to "1" in last night's statistics post under "Market Days Not Traded". That's right, try not to faint as there was little reason to do so today. Then again, maybe watching the market is still trading ... I'll leave resolving that paradox for another time.

And here's one final stat before I close for Christmas. What started almost six months ago as simply one trader's personal trading diary has now expanded to an extent where it has been read in 75 countries and is averaging 300-500 visits daily. What's even more incredible is that the growth has been primarily due to word of mouth as the only outside influences were very brief mentions in Dr. Brett's site and the recent interview, and I refuse to actively market it.

And while I don't know what 2009 will yet bring in terms of blog changes and my personal trading pursuit (still mulling over options), I remain steadfast that this blog -- in whatever form it takes next year -- will remain completely commercial and hype free. As I've said before, I have nothing to sell, don't need the money, don't want to manage external money, and am not "looking to be discovered" (irrelevant since most in the industry know me anyway.)

Sound like a terrible business plan?? Some would say yes. Yet the results of my own trading since this went live -- with all the personal and external accountability that came with it -- along with comments like Sean's the other night, suggest this has been a win-win far exceeding anything that could have been planned. Add to that new relationships, even if just virtual for now, and all I can say is, "who'd have thunk?"

I've said before that in the end, this blog isn't about me. It's about you.

I'm just trying to stay out of my own way.

Merry Christmas and Happy Holidays.

Tuesday, December 23, 2008

Special Post - 2008 Statistics

OK, let me first do away with the disclaimer that I strongly believe statistics are largely irrelevant, and their use is best when limited to very sporadic look backs. For me, "sporadic" is once a year, period. After all, a pitcher shows up to pitch, a batter shows up to bat, a trader shows up to trade, and the stats are natural indirect fallouts. The minute we start trying to "manage" to stats ... well, therein lies the danger and is where many losing traders start down the slippery slope of doing things like capping gains to try to fit certain distribution patterns.

Having said that, and with a deep breath, here's some preliminary data on the year:

2008 Statistics (All $ are net of transaction costs)

Market Days Traded: 253
Market Days Not Traded: 0
Perhaps we should stop right here as it's likely the most telling statistic and why my December brain was fried.

Days Positive: 197 (78%)
Days Negative: 56 (22%)

Weeks Positive: 45 (88%)
Weeks Negative: 6 (12%) Includes 2 in December

Months Positive: 12 (100%) The current trailing stop will ensure December ends +.
Months Negative 0 (0%)

Average Day P&L: + $6,505
Median Day P&L: +$6,195
Note: Multiplying the average by the # of days traded won't tie to the Net P&L for the year because the latter includes overhead expense.

Largest Gain: $70,423 September 18 (Yes, I've linked to it. 'Twas the toughest post of the year.)
Largest Loss: -$93,574 October 6 (This one's a fun read. Note the comment "On 12/31, this will be a distant memory and the wound will have scarred over." Just remind me to take 10/6/09 off.)

Days to Recover from Largest Loss: 4

Largest Daily Winning Streak: 15 Days - Aug 26 to Sep 15 (+ $185,250)
Largest Daily Losing Streak: 3 Days - Feb 1 to 5 (Minimal Damage at -$9,213)

Largest Weekly Winning Streak: 21 - Jul 14 to Dec 5
Largest Weekly Losing Streak: 2 (Twice) - May 19 to May 31 and Dec 8 to Dec 19

# Times with Consecutive Losing Days: 9

Daily Profit Distribution (# Days at each Profit or Loss level) ... Click to Enlarge.

Note 75% of the days fall within the first 3 bars of profitable segments (essentially 0 to $30K).

And perhaps the most important statistic of the year, when compared to prior years (after all, the only stat that means anything is the bottom line):

# Months P&L (before overheads) > $100,000: Zero, Nada, Zilch

# Months P&L $100,000 - $200,000 : 6
# Months P&L $200,000 - $300,000: 2
# Months P&L > $300,000: 1

Talk about a Bamboo shooting from the ground.

And while I'm not sure what this all says -- and won't spend much time trying to figure it out -- aside from the one day from hell (which as noted was recovered in less than 4 days), I seemed to be in multiple prolonged periods (multi-day & multi-week) of being in the proverbial "zone" while keeping damage to a minimum during times when I was out of sync. It's frankly hard to believe that out of 253 trading days, I only had nine instances of consecutive losing days, and only one where it stretched to three.

Of course in less than ten days, this will mean nothing. I'll need to approach 2009 as I did every day, week, and month of 2008 ... as if 2008 was a disaster and that I'm starting not only from scratch, but from behind. Way behind. A new season will dawn and a new champion will be crowned. I'm going to have to jump into that damn pool again and get wet.

Yet that's for later. For now, it's OK to reflect on 2008. The Year of the Bamboo.

But not for long.

Tuesday Notes - Illiquid Market

2:24pm My interest in this market continues pretty cool on this unofficial vacation week, and like yesterday, it's pretty much a scratch on the day thus far at -$7K which reflects the horrid pace and complete lack of emotion in the market, which will be even worse tomorrow and Friday.

For those new to my diary (and yes, that's all it is), I make most of my keep by providing market liquidity and fading strong market emotion in a market with a clear and smooth flow (confirmed by indicators ... NOT the other way around), both of which -- liquidity and flow -- have been markedly absent in recent days.

2:43pm Of course the moment I write that, the market ignores me. Short-biased on the early PM bull trap. [I'd also tested a long on the attempted break north and scratched it.] Shorted up to 863 covering down to 861 on the first break pullback. Back in cash to see if the flow gets any better. Longs are stuck on the trap, but how many? If a bull trap exists and no one's around to trade, does it make a noise? VIX sneaking up.

2:48pm PM similar to Monday's trade for now with multiple scalp opportunities in a very thin market ... shorted up to 860.50 covering down to 858.25. Still don't care for the pace and keeping sizes light. Can't remember the last time I had 100 contracts on. With this depth, I'd take out two levels.

3:12pm Shorts not realizing the illiquid market and forgetting to cover getting hammered again like yesterday ... 7 1/2 point ES pop. Know your conditions ... duhh ... this isn't October!

OK, kept it light on another scratch day, although narrowed the completely irrelevant chip stack nick to under -$2K with the afternoon sequences.

A reminder that Globex closes at 1:15pm ET tomorrow and doesn't reopen until Friday at 6:00AM ET. Eurex is closed until Monday.

2008 Earnings Trailing Stop Update:
2008 Net Gains (after all expenses) prior to today: $1,633,321
Tuesday Net Loss: ($1,718)
Updated Gains: $1,631,603
Adjusted Trailing Stop: $1,625,000 (No Change)

Note my comments to yesterday's post re: the stop logic and why it's so tight.

And so the vacation continues. Look for some 2008 stats later tonight as I begin to determine what the heck I did right this year.

Monday, December 22, 2008

Monday Notes - "Vacation" Trade

2:12pm And so the holiday volume has begun to play out as expected, resulting in a very poor and sporadic pace. And you know how important pace is to me. That, combined with my strong focus on protecting the year's earnings, has me focusing largely on my non-market obligations while keeping half an eye on the market.

One thing is certain if you're trading this market ... it's paramount that profitable exits be set ahead of time, as brief spikes to profitable wholesale exits with no second chance may be common in the light volume, and such has been the case during much of today's trade.

As I mentioned in Friday's 2008 results post, I'm going to post my earnings trailing stop daily until the ball drops on the 31st so as not to lose sight of it -- and will do so at the close. My plans to watch from the sideline more than anything else remain entrenched, to both protect the earlier 51 weeks of work as well as to give my brain that much needed mental break. I suppose that's one advantage system traders have over discretionary traders ... the computer never needs a break.

2:27pm Market breaking to the south and VIX on the rise with slightly better volume. Should be one decent pullback short entry or further emotional extension long. Any trades will be modest size at best and will be extremely cautious on longs. Sitting short in the high 863s.

2:44pm Took small nibble 862.00 and covered to 861.25. Preferred higher entry for size. Still sitting in 863s.

2:56pm Better; shorted 863.50 to 864.50 and covered to 863.00. Then repeated again 864.00 covering down to 862.25.

3:00pm Extension. There's the choice, take one trade and hope for extension, or take multiple and scalp each [essentially, scalp vs. swing]. Results often the same and no right way of course. I simply prefer option 2 which pays regardless of whether the extension occurs, espcially when the market depth is tiny as is the case today. Plus, you're on "vacation" Don ... why are you trading?? Trend closes of course make option 2 look foolish ... until of course the extension barf provides the wholesale contra entry or the next morning provides the high probability post-trend oscillation entries.

3:45pm: Took wholesale long 854.75 on TICK divergence and extension from trend supports and closed for final trade.

4:10pm Shorts forgetting to cover into the low volume illiquid drop getting absolutely hammered into the close.

Fun afternoon high % nuggets on a vacation day. And so we'll update the all-important 2008 trailing stop as follows:

2008 Net Gains (after all expenses) prior to today: $1,628,199 (includes slight audit correction from Fri)
Monday Net Gain: $5,122
Updated Gains: $1,633,321
Adjusted Trailing Stop: $1,625,000 (increased from prior $1,620,000)

I'll continue to post closing year thoughts and 2008 statistics throughout the week.

btw, someone on Sunday asked me where the bags under my eyes went and why I seemed so relaxed. I just smiled and said, "It's a very long story for another time."

Saturday, December 20, 2008

The Weekend Trader - A Burden Lifted

Some thoughts now that I've put a padlock on this year's results.

Burden Lifted - A funny thing happened this morning ... I woke up feeling like a huge burden had been lifted. For the first time in probably a year, I felt no self-imposed pressure to perform. Yes, my mind remained pretty much on the market during each weekend this year. I didn't even feel the need to go to Foxwoods to sharpen my poker (and in return my trading) skills. I have a strange sense of peace with myself. And it's no coincidence that today is the latest I've posted the Weekend Trader piece. The beatiful six inch layer of new snow overnight was a nice added touch.

December Lessons - December has taught me several lessons (yes, the lessons won't stop until we're 6 feet under). The first is that you can't trade half-heartedly, which best describes my abysmal December trading. The only other way to describe it was that it sucked. It's validated my belief that one has to be fully immersed in the market at all times to be at the top of one's game. Many times this month, I felt like Randy Moss when he used to take half the plays off, and then tried to turn the focus back on but found myself playing "catch up", and as a result took lower probability second (vs. first) entries. It was like I was a rookie again ... but for a different reason. Which led me to thinking about ...

Sustained Consistency - Dr. Brett had a good post on Friday discussing another trader's December struggles. Seems there may be more than a few of us in the same boat. Then, after rechecking a few facts prompted by comments to last night's post re: performance benchmarking, I went back through monthly CTA stats over the last few years as published by Futures Magazine, and it reminded me how fund results for even the strongest performers vary significantly from month to month.

And such is the challenge. Adapting one's pulse to match the ever-changing market's pulse is all but impossible to do 100% in real time. And while I think discretionary traders can react more quickly than system traders, we're still often prone to losses -- or at best reduced wins -- as the market's pace changes until such time as we adapt ... hopefully before the pace changes yet again.

Benchmarking - If you've never checked out Futures Magazine (no vested interest), it provides some of the best industry benchmarking data if you're looking to compare yourself against professionally managed money. They publish the top performers monthly, segregated by funds over $10M and under $10M, and then at the end of the year provide very detailed stats on the top performers including annual return, worst drawdown during the year, sharpe ratios, best 12 months, 3-Year return, amount under management, and more. My broker -- who works with many CTAs - has often used the data for performance benchmarking.

For those interested, for funds of < $10M, New World Capital Management led the list for 2007 returns at just over 205% (4:35pm added comment: which allegedly may not be real ... see comments to this post), and DEC Futures Fund Ltd topped the 2006 list at 155%. And while I personally think it's best to simply strive for peak personal performance, the data can be useful for comparative purposes.

2009 Plans - No clue right now as the brain is pretty much shut down. But I'll keep you posted.

Enjoy the rest of your weekend.

Friday, December 19, 2008

Special Post - It Is Time

... the race is not to the swift, nor the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned, but time and chance happen to them all. -- Ecclesiastes 9:12

I dedicate the following to:

My wife Debra and my family, who lived through my craziness over the past decade and whose faith in me never wavered;

Dr. Brett Steenbarger, who will never truly know how powerful his seeds of thought in his first book were;

To my broker Pat Lafferty and MF Global, who provide the best service in the industry and is the best lifeline I could have;

And most importantly, to God, who gave me strength when I was weak, patience when I was impatient, and was the true Gardener of this year's miraculous
Bamboo Tree.

*** Please note if you haven't yet watched last night's important prefacing video, please view it before continuing. ***

And so it is time. Time to measure the Bamboo. Time to rest and reflect.

Time to lock in and protect $1,620,000 on the year with a tighter than tight trailing stop that only allows for a $8,000 loss between now and December 31.

My only disappointment has been the last two weeks of sub-par performance. Yet I clearly realize that's like saying the Celtics beat the Lakers in six games last year instead of four. Fatigue finally took its toll in December via lack of focus and interest, as if to keep my humility in check for the future.

At the same time, I can see how easily Archie Karas and poker amateurs (and even a few pros at times) can begin down a slippery slope of eventually giving back all one's gains from even dizzying heights. Recognizing my mental state and having the self-control to hit the brakes after modestly donating to the market over the last few weeks and not trying to "win it back" has by far been my most difficult task of the year. Such is why I must now implement the tight trailing earnings stop.

$1.62 Million. 97.5% of my chip stack high. +210% return in the most volatile year in market history. Ever. I'm told it will be near the top of 2008 industry performance. Back to our ongoing poker analogy, it's comparable to 7th place in this year's World Series of poker, and 4th place in the 2007 event. And there's no profit sharing as it's my own private fund. It's still just a blur and hasn't sunk in.

Right now, my only memories are those I mentioned in last night's video, as it's incredibly easy to remember the hurts and pains. For now, I don't remember the wins. None. Perhaps that's because the fictitious draw concept is so ingrained in my mind, I think they're always ahead of me.

I now know how Michael Phelps' mental state felt near the end -- emotionally drained and spent -- and understand why he didn't set foot in a pool for a few months after the Olympics. At the moment, I just want to lie on a warm beach for a month (although the market would have to be closed). In trading, there are no off-seasons ... just fast and slow seasons. We have to create our own off-season. That too, will be hard. Usually, the market or our performance dictates the off-season.

And so I present the following Bamboo whose 1-year moonshot was more than a decade in the making (click to enlarge):

Yes, it's real and 100% auditable. It's not like the Newhart show finale were Bob wakes up next to Emily after nine years at the Vermont Inn and realizes it's all a dream. At least I'd better not wake up in 1999 tomorrow ... that would be sick.

It's said a picture says a thousand words. That's good, because I may be out of them, other than to say I hope this provides inspiration for all who may doubt themselves -- regardless of their pursuit -- and all who are weary.

Many told me to write a book. I thought the blog would be better. But that will be true only if we someday see a forest of Bamboos.

May God richly bless you and your families during this Holiday season and into 2009.

Thanks to those who took the time to comment on last night's video. I'll take them to heart and will continue to post reflections over the weekend and coming weeks as 2008 draws to a close. Something tells me I'm not going away.

Also, Part 2 of my TradingMarkets interview with David Penn has now been posted.

Thursday, December 18, 2008

** VIDEO ** Preface to 2008 Results Post

Tonight, I discuss importance perspectives heading into tomorrow night's post of Year-to-Date results and trailing stop. I also look for input with respect to continuing the blog into 2009.

Thursday Notes - P.M. Green Light

5:30pm Well, the market that's been frustrating every trader trying find a trend finally found some rhythm in the afternoon when all supports gave way, the VIX turned north, and the shorts pounded the market hard.

At this end, I remained in my conservative mode through much of the day which paid "non-loss" dividends in the morning by keeping me out of the volumeless chop, although I did take an early hit on the failed 11am breakout attempt north that I felt was primed based on the declining VIX and early price strength. Nevertheless, the afternoon break and first pullback short entry allowed me to overcome the early stop to increase the day's chip stack modestly by a few thousand.

Not a home run by any stretch, but I'm simply looking to close the year with a few solid base hits as I look to regain a crisp trading rhythm as I slow down into year-end (a bit tough when the market is standing still 90% of the time as has been the case lately).

Chip Count Correction - Please note that I did an audit of my year-to-date results last night -- comparing my financial system to brokerage statements -- and discovered that I'd accidentally entered a July 2008 trade as July 2003. The result was that July's results were understated by about $20K, and both the chip count graph and monthly equity charts to the left have been adjusted to correct the error.

Two reminders for Friday -- First, as I mentioned yesterday, I'll be posting the year-to-date tally with the protective earnings trailing stop after close. Protecting gains is now my most important objective, which is a purposeful shift from earnings accumulation objectives that took priority over the first 11 1/2 months.

Second, will be publishing Part 2 of my interview with David Penn on Friday evening. In it, I'll discuss poker, betting size, and this blog. I'll post a direct link on this site when it's up.

I'll also post a video tonight.

Wednesday, December 17, 2008

Wednesday Notes - Two Strokes Remaining

4:00pm OK, first I'll address the day which for important psychological reasons I'm going to break into two sessions: Europe (stopped on early break of long support while heavy, was a bit anxious, and didn't trade particularly well at -$22K) and then the U.S. session (finally got my pulse aligned with the market's for the first time in a while, had a good afternoon "feel", and was extremely disciplined -- especially in the last hour -- for a modest +$7K.)

So mentally heading into Thursday I actually feel I've finally regained a sense of rhythm. btw, today was another example of the day's +/- results not meaning squat except in aggregation over the course of the year. I care more about my confidence and how I'm trading than any "number".

Nevertheless, I have some decisions to make as I'm now right at a mental trailing stop on the year's earnings that I intend not to break. I'm not going to disclose the figure yet, but it's essentially a protective control I've put in place to ensure that I don't drop below retaining 97.5% of my equity high. It also allows me to bank a profitable December -- even if modest -- to keep me in a decent frame of mind for whatever January brings.

As I mentioned in last weekend's video, I view this Friday as pretty much my last trading day of the year. And so perhaps it's fitting that the trailing stop is coming into play right as this marathon race is coming to an end, and at a time when the outstanding market rhythms of the fall have given way to lower volumes, poorer pace (for my style that takes advantage of extreme emotion) and sporadic opportunities where it's too easy to try to force things. And yup, I'm forcing things.

I'd be lying if I didn't say I'm disappointed in my performance of the last two weeks. Yet if I remove myself from the immediate moment, I'm frankly stunned that it didn't happen more along the way of this incredible 2008 journey. 49 weeks is a long time to go without an extended funk. And if this simply means my trailing earnings stop gets hit right as the race is about to end, then it's more than acceptable. Who knows, perhaps it's Someone's funny way of keeping me humble for 2009.

And while the ticker says 14 days to go before performance can be measured -- which remains true -- on Friday I'll disclose for the first time all year the annual tally, equity balance, and trailing stop ... and will each day until the ball drops so as not to lose sight of this critical objective. Before, it was inappropriate to do so. Now, it's imperative.

Back to our year-long swimming analogy, I'm now only two strokes from the wall and am getting ready to grab a towel. And so long as I finish above my trailing stop, I'll indeed finish ahead of Alain Bernard to my right!

The journey has been long, we're almost there, and I'm not about to drive the car through the garage door.

It's almost time to cut down the Bamboo.

Tuesday, December 16, 2008

Tuesday Notes - Getting Interesting

6:10pm Well, in light of last night's post and my engine stalling, I figured the worst thing I could do was to press on what is typically a standstill pre-FOMC morning followed by a crazy post-FOMC afternoon. So I again chose to pretty much stay on the sidelines with my lightest trading day of the year at 314 contracts for a +$2K gain hardly worth mentioning, although the teeny profits do reflect a solid post-FOMC announcement fade on a high TICK reading (small size obviously) with a cover on the TICK retrace to zero, again kept me from the dreaded 3-day consecutive draw, and put me in a decent frame of mind heading into tomorrow.

And here's where it gets interesting, For the first time in a while, we have a possible morning-after-trend oscillation setup which is one of my favorites. The key question is can this trader running on fumes summon the strength to find that one last performance push, and will the market cooperate by providing the pace to match?

The table is set and I need to be hungry.

15 Days to go.

As I said, here's where it gets interesting.

Monday, December 15, 2008

Special Post - Empty Tank

Dear Diary,

As I sit here tonight pondering the remaining few weeks of 2008, and while up until about a week ago I had planned on "running through the tape" right to the 12/31 finish -- or at least during this last full week of 2008 trading as I mentioned in this weekend's video -- I now seriously wonder if I've simply emptied the tank dry.

I say this not because of the lack of market action or recent performance, but because for the first time all year, I can honestly say that the "disinterested" gremlin has now joined its "mentally fatigued" brother. And such a combination can be a recipe for disaster. Sure the market's lack of recent action is likely contributing to my feeling, but I believe it goes far deeper than that on a personal level. And I'm also finding it hard to get pi$$ed at my trading which is usually the cure for complacency.

As I've stated all year, this year's journey was in part a test to see if I could take one year of my life, and rededicate myself to trading in such a way where I'd learn what the results could be if I truly "left it all out on the field". All out, no looking back, no regrets ... pick your mantra. It's something I'd always wanted to do, and so I decided at the ripening age of 47 that 2008 would be that year.

Looking back at September through November, aside from one large hit in early October, I seemed to be dancing with the market cheek-to-cheek, often matching its violent moves as if we knew each other's intentions ahead of time. +$20K days begat +$40K days, which begat +$50K days, with even a +$70K day thrown in. I woke up every day invigorated and excited. I felt as if I were in my 20s again, and my mind seemed sharper than ever.

And while I'll never use the sl*** word (rhymes with "dump"), I'm clearly in a funk right now. My interest isn't there, which is resulting in hesitation and a flat to declining equity curve over the last several trading days. And it's now been a week since I had back-to-back positive days -- which is almost unheard of for me. Frankly, I'll take a couple of modest $+5K days right now in a row. Hell, I'll take two strong trade sequences in a row.

I mentioned the other day that I need to find that finishing Olympic swim kick. But the arms are heavy. I can see the finishing wall, but can't feel my arms. I look to my right and left and they're still there, but I can't feel them. Somehow, they're moving, but it's a struggle. I honestly feel like Michael Phelps in one of his last races where his goggles filled with water and he simply completed the last half of the race without seeing a thing. Except that he continued straight, while I'm starting to zig-zag.

If those looking over my shoulder are wondering if I'm over-dramatizing this, I'm not. This year has purposely been my mental Olympic race to end all races. A year where I'd learn more about myself than any other year of my life. A year where I'd put my decade of market "training" to the harshest test possible. A year to put up or shut up. A year of pure endurance.

It's quite possible though that the tank has now run dry. While the early fall's performance momentum seemed to carry me in the first week of December, that wave seems over and I'm truly looking to a Greater Strength to carry me over the finish line.

The needle reads E and the fuel light is on.

The final outcome is now out of my hands.

Maybe the true lesson is that it was never there in the first place.

Monday Notes - Turn Up the Volume

6:15pm Will someone please turn up the volume? It seems that both the market and my personal trading volume (446 contracts -- both sides!) have slowed to an absolute crawl. In fact today may be my second lightest trading day of the year. I had about zero interest on the day, except for probing a few shorts on the 1:20pm and 3:15pm breakdown attempts, stopping on both for a -$4K day's scratch.

The main comment I have about the market's recent pace -- or more accurately lack thereof -- is that it reminds me of early September when the pace changed drastically, and it took many of us (those that survived) a few days of realizing what was going on to adjust. Normally, all we can do is minimize the losses until the adjustments are made.

And while market changes can frustrate discretionary (vs. system) traders, I suppose we can't feel too bad as it actually has a similar effect on systems which often aren't able to adapt, and thus get stuck with setups that worked in earlier times but not the present. As has often been said, when you find the key, they change the lock. At least discretionary traders can put the brakes on once we realize what's happening.

At this end, I'm truly looking at the week as a single "trade" ... which for all intents and purposes will likely be my final trade of the year as I mentioned over the weekend. Today I paid for some blinds and a few feeler bets. Yet I need to start seeing Jacks or better if I'm to put much more of my hard earned 2008 capital at risk.

Saturday, December 13, 2008

The Weekend Trader - Foxwoods Poker Wrap

Ironically, after one of my poorer trading weeks in memory, I seem to have played some of my most disciplined and focused poker today -- having gotten to Foxwoods at about 11am, playing the $1/$2 no-limit cash game until 4pm, more than doubling my $300 buy-in to $652, and walking away on my "equity" high.

In the five hours, it was three hands that made most of the gains: A full boat taking down an Ace-High flush, and getting dealt pocket Aces twice where I purposely varied my play by slow playing them once and pushing the second time. I still struggle with how to play pocket rockets in a low stakes cash game, as you'll typically get many callers on small raises who can easily beat you on the flop, or else there isn't much of a pot to take pre-flop if you push hard if there's not much betting action. I pushed the second time because it was my last hand and one guy bet $15 with two subsequent callers before me, so I pushed hard, told them it was obvious what I had, and they all laid down.

Yea, I know it's only small stakes. But I still strongly believe the games have helped sharpen my trading and was what the doctor ordered after this past week. There's nothing like a two hour drive, several hours at the table, and a two hour drive back home to think about some of last week's donkey trading moves. Elements I'll try to carry forward into next week include choosing not to post as soon as I sat down, getting in the mega-patient mode, and making several decent laydowns of "good", but second-best hands.

Btw, my current favorite poker player is Mike Baxter, who (surprise) is a hedge fund manager in his "real" job. He's been on Poker After Dark lately, and despite what Phil Helmuth says, is a pretty decent cash player. I'm going to try to meet him personally.


P.S. If you're looking for Part 2 of the interview, David Penn told me today they've moved it to next weekend, and both Part 1 and 2 will be linked together. In it, I'll discuss poker, betting sizes, and the impact the blog has had on my trading.

The Weekend Trader - 2008 Wish List

Some tidbits on a Saturday Morning.

Hockey or Trading? -Here's a quote from the Eastern Conference Leading (I can't believe I just typed that) Boston Bruins' coach Claude Julien, in referencing last night's sloppy 7-3 win over Atlanta: "Maybe we didn't make the strong plays all the time," said coach Claude Julien. "We're trying to work ourselves out of a little bit of a funk. You're going to say it's 7-3 and we're still doing some good things. The way we played the month of November, I guess the expectations are high for everybody. I think that's why we have a tendency to look for all those sloppy plays at times. There's still a lot of good things going on, but we have to kind of settle ourselves down a little bit to make some stronger plays at times."

Hmm .... you'd think he was describing my recent trading. Just goes to prove once again that trading is indeed a sport ... game, set, match.

2008 Win-Loss Ratio - OK, here's something for the stats folks. Through 11/30, my daily win-loss ratio for the year was 4.15. Keep in mind I define a net gain at the end of the day as a "win" and a net loss at the end of the day as a "loss" ... regardless of the results of specific trades. And you know my feelings on stats ... they're simply an interesting after-the-fact anecdote, and I don't do anything to "manage" to get to a certain number. Doing so would be like a pitcher saying he's planning to throw 80 strikes and 20 balls in the next game.

I can't draw many conclusions from the 4.15 figure, other than perhaps that I screw up about 20% of the time.

Christmas Wish List for the Industry - It's a short list: (1) Either full regulation or abolishment of free and subscription trading-based chatrooms, and (2) Full disclosure of performance results for anyone providing trading or investment results/advice, including "mentors" and chatroom "gurus".

Make a stock or futures "call"?, I want to know if you're trading it, your exact entry and exit fill (missed fills alone would eliminate 90%+ from room "calls"), and your result with full audit rights. If you're not trading it, why the hell not?? And don't give me the "First Amendment", "we can't legally disclose our client's trades", "we're precluded from trading what we advise", "it's simply entertainment", "I'm not really providing advice", "buyer beware", or "I'm a mentor, not a trader" arguments -- all of which are self-serving either for subscription revenues or their own front-running purposes.

As for the last point re: mentoring/teaching, sorry, I wouldn't want to learn to stop smoking from a coughing doctor, learn to lose weight from the hot dog eating champion, or learn to fly a plane from someone who's a "good teacher" but has never flown extensively and successfully. Frankly, I want to see the detailed records of Suze Orman, Jim Cramer, Mario Gabelli, every interviewee on CNBC with a recommendation, and every chatroom "leader". This will of course all but seal I never get invited again to a chatroom interview.

Sorry folks, but we're talking money here and accountability should be first priority. The gig should be up and it's time the curtain is fully opened. If you're legit and can comply with ramped up regs, you'll have no problems. And yes, everything I've posted in this blog would withstand a 100% audit. You can take away my exchange seat if it didn't.

Heading to Foxwoods for a day of poker cash games and to take the mind off trading. Enjoy the weekend.