Friday, October 31, 2008
I also expect the market's conditions will revert back to more traditional rhythms, which will lessen the opportunity for monster moves and P&L impacts -- especially for those of us who fade emotional moves -- but that of course remains to be seen.
For those new to the charts to the right (click to enlarge), the top one tracks each month's worth of trading. The dots on each segment reflect equity points at the end of each day. The chart purposely shows me "digging to the surface" each month to emphasize that each month stands alone.
The second one provides gross trading gains, draws, expenses, and net profit for each month in the form of chip stacks. You can find a more detailed explanation of each "stack" in my October 4th post.
I really don't know where to begin to describe this month. Yet it's probably safe to say that I'll never see another month like this so long as I live. Never.
It was a career record month in many respects, including my largest single-day draw (before I got used to the "new market"), most number of days > +$20K (nine), and largest total net after expenses of $315K. I had to change the scale of my "digging to the surface" chart yet again. There's also probably a record in there somewhere for the most hours of sleep lost, but I don't track that.
And the truth is, I made a lot of mistakes -- two significant ones come to mind -- and those errors are the only elements of October that I'm going to take with me into November. btw, if you're looking over my shoulder, there can't be stronger evidence that this business and life is about overcoming mistakes. Make a mistake? Get over it and keep moving (yes, I'm shouting). There's a reason we've been given a world of tomorrows. For despite the "pristine" chatroom and advisory subscription hype, profitable traders make plenty of mistakes, and if making that point is the only purpose this blog serves, it will have been worth the effort.
Aside from that, I'm not sure what else to say. All I know is October is officially history, no longer matters, and the new game starts on Monday. The 2008 final table.
Two more months of tunneling to the surface before this year's game ends, and countless opportunities for continual self-improvement. (btw, the self-improvement game will never stop ... even after December 31.)
So we're back to square one with the only chart that matters on the lower right.
My "coach" tells me October was an awful, gut-wrenching, sick-to-my-stomach draw and I need to get back to focused recovery mode. He says I have two days off before I have to get back to work.
I think I'll need a new shovel though ... the one in my hands is so worn it looks like a spoon.
Have a peaceful weekend.
From here though, it's a crapshoot (thus the blog typing), as ES still hasn't broken its late Wednesday high just north of 970, and I've thus been exiting on each extension.
And while the decreased volatility should have be ramping the sizes upward, I'm keeping it light because (1) I need to get the feel of a less volatile market again, and (2) it's a Friday and last day of the month ... and I'm in major chip gain preservation mode today.
The brain cramp of the day so far was shorting the DAX too soon on its consolidation break, which has limited my net chip gain to only +$7K. It was stupid and cost me some tuition, yet I recognized it, quickly moved on, got some better wholesale shorts, and used those mental notes to be alert for a possible repeat in the U.S. session, which has been helpful.
1:21pm ES trying for the 970 break.
Been nibbling small sizes long on this last push, but keeping things very tight on a Friday. VIX remains in a downtrend and has extended from its late morning pullback.
1:25pm Ding, ding, ding ... think the whole world wasn't watching that? 7 point extension.
1:28pm Nice ... shorted 76.25 and exited/reversed on the pullback. Still keeping sizes small.
1:38pm Took FESX short on that last ES extension ... 2632 down to 2626 ... practicing for the future. Eric - I think I found a new toy. Surprised how thick FESX still is on what's now Friday evening over there. Emotion is emotion ... doesn't matter what country.
1:45pm Looking for an ES pullback toward 5 min support.
1:53pm Got it ... best entry 73.25 and exited on the pop. I'll let others go for the riskier further extension. Getting close to shutting it down here. Maybe one more long if we drop toward 70.00
1:56pm Nice ... best entry 72.00. and out on the pop. That was a gift.Going into major income preservation mode ... chip gain now + $12K (trailing stop +$10K), market depth thinning out, and I don't do Friday afternoons well. I'm also losing focus a bit, so that might be a wrap regardless of what the market does now.
2:17pm Passed on that last extension as the 15 minute chart got pretty stretched. Sellers hitting bids now.
2:22pm Nice read ... nibbled some long on the sub-70 emotional barf. You can just feel the emotional excesses in the trades. Sometimes I feel like tipping them ... especially since I'm sometimes on the wrong end as well!
So long as the VIX continues its downtrend, pullbacks remain buyable and shorts are scalps only on emotional price extensions for those nimble wholesalers. See the posted VIX chart for the "wind at your back" chart of the day.
2:47pm ES resistance at 980 for now. Only a ten point thrust so far ... hmmm. Path of least resistance still up though.
2:56pm Still doing light nibbling for long scalps on retracements. 980 resistance yet again. I might consider a small long on a trade at 981. Shorts must be getting tired as price keeps holding.
3:03pm Come on, giddy up.
3:04pm Sweet ... out. Actually chose entry from earlier pullback vs. the 981 in case the momentum died (second rangebreak of the day a lesser %). Best exit 983 and that's a wrap for today, the week, and the month before I do something stupid. Locking in slightly more than +$15K.
3:06pm Wow ... nine point Wyle E Coyote drop. Damn good decision.
I'll post the October #s shortly (warning: get out the motion sickness patch) for one final review before I head to Foxwoods and Mohegan Sun for a two-day poker marathon.
Keep the comments coming. I'll look at them and respond over the weekend ... there might just be some delay in posting and responding to them. We're also bagging the Sunday PM PalTalk lounge and going with Wednesdays for now.
Thursday, October 30, 2008
'Twas essentially a choppy session, and I did a pretty decent job navigating it by trading the 1 minute chart (trends and contra trend extreme fades), although I got nicked a bit midday as I got cute going for one more extension on the 1:45pm drop. Made most of it back in the afternoon though.
On the plus side I stayed completely out of the final 45 minute whip-o-matic, kept sizes under control, and carved out an acceptable +$15K chip gain. I also made my first trade of the EuroStoxx 50 (FESX) for +640 Euros (thanks Eric ... we'd discussed this in the PalTalk lounge last night and I attached proof to the right!) and am going to begin keeping an eye on that, both in terms of trading it and using it as a confirming indicator for the DAX. It will likely take some time to fully understand how the two markets interact, and I look forward to some new learning in that area. So much to learn in this business, so little time in our lives.
I expect to trade Friday lightly to lock up and score the month's chips, before sitting down at the final table on Monday. For more on that, see today's earlier post below.
Have a pleasant evening.
The battle has been grueling and minefields abundant as players have had to battle lost sleep and lapses in concentration resulting from the constant stress of having to make decision after decision as thousands of hands are played -- not to mention bad beats from 2% probability river drownings.
And yes, those left standing have also been lucky. They've escaped jams, sometimes as the result of their skill, but often as a result of simply being in the right place at the right time.
Those that have been following this blog know what's next, and I'll apologize up front for what may seem like an overdone analogy. Yet I can't help it as it's extremely relevant and timely as we get ready to enter the "final table" of November and December. Plus, this remains my diary so anything goes.
You see, for some reason I've been put in a position similar to those who will battle it out on November 9. On Monday, I'll be entering my version of this year's 2008 "final table" essentially playing with the house's money.
Yes, I've been on a mission this year. For the first time in my trading career, I decided to suck it up big-time for 366 days and make sacrifice after sacrifice to push myself harder than I ever had. In doing so, I sacrificed hundreds of hours of sleep, plenty of personal time, non-trading business income, and some of my sanity ... not to mention the 7th-9th innings of the second greatest baseball playoff comeback ever. The goal was simple -- personal peak performance.
If you're new to this blog, my July 26 post helps set the stage and discusses my initial $1 Million mission and goals. A later post on September 23 then raised the bar by another $250K. Both objectives have been accomplished and now it's on to the final table on a complete free-roll with house money. Yet like the WSOP, the game isn't over yet.
Of all the players at this year's WSOP final table, I can most relate to Dennis Phillips, who will be the oldest player at the table at 53 ... just six years older than me. And yes, I'm rooting for him to prove there's something to be said for decades of life experience. Yet my favorite player (not at the final table) remains Barry Greenstein, whose silent stealth play over his career has put him in a financial and psychological position to donate his time and funds to greater causes. And I can also relate to Michael Mizrachi ... a fellow "grinder", albeit in a different industry.
btw, I recognize that the poker-trading comparisons are better suited to cash poker games versus tournaments where one is "forced" to play due to increasing forced bets and luck plays a larger factor.
I'm well aware of the landmines. The story of Archie Karas will always serve as a reminder. And as this year's televised WSOP hands have again validated, it only takes a single mental slip to undue thousands of hands of a well-played game ... and to hand the entire chip stack over to someone else. I need to remain aware of both of those lessons before I can close the book on this year's tournament on December 31.
Tomorrow night, we'll take a final peek at October results -- which will of course mean nothing when the new dealer shows up in November. And I anticipate the next two months will be among the toughest trading months of my career, and will be on the defensive much of the time. One reason is that the rhythm of the last few months -- now that we've grown accustomed to it -- will likely change yet again.
So the goal at this end is now fairly simple -- incremental gains balanced with chip protection. I won't raise the bar again or risk ten months of sweat and hard work. For unlike the WSOP, I get to keep whatever chips I have on December 31.
But it should be fun.
Welcome to my final table.
Wednesday, October 29, 2008
And as is often the case under such circumstances, I found myself scrambling and pressing a bit trying to capture pieces of the textbook morning-after-trend oscillations, and the result of missing the prime entries has resulted in a subpar +$5K performance heading into the FOMC decision.
I also think the month's efforts are catching up with me, as I continue to note a lack of keen focus and concentration over recent days, and a poor transition from defense to offense when needed. And we all know that trying to trade FOMC action with a lack of full concentration can be deadly.
3:37pm Not much better in the afternoon, although I stayed out of trouble and nudged the pathetic chip gain to just over +$6K by catching some of the post-3pm consolidation break and extension.
Clearly not one of my better days, but a win is a win and tomorrow is another day.
We'll open the PalTalk room again tonight at 6:30pm ET and I'll be there around 7pm. We'll keep it open so long as there's interest. If it's closed at 7:15pm, I'll take a nap instead :-).
Tuesday, October 28, 2008
Have a pleasant evening.
At this end, I traded portions of the overnight session -- focusing on shorting approaches toward Monday's late-day resistance, and took some losses in the form of repeated stops until it was clear ES wasn't going to give it up overnight. The good news is that I recognized what was happening, kept sizes fairly light (I think I took 4-5 probe entries), and kept the loss at that time to under -$7K (heeding my lessons from earlier in the month).
From there, I didn't do much until the U.S. day session and have continued to focus on short-term contra-trend scalps, keeping sizes and holding times extremely light in light of continued decreasing intraday ranges and trends ... the late day 30-minute barfs notwithstanding. I've had a moderate degree of success thus far, having turned the -$7K chip loss into just under a $10K chip gain.
As I write this the 15-min ADX is down near ten and pretty much flatlined with no trend in play. Even the 5-minute hasn't seen much of a trend over the past few days, which leaves 1-minute trends and fading extreme TICK spikes the main games until the winds again change.
2:27pm ES again trying to break to the upside. One of these days -- who knows when -- it's going to stick for one of the all-time short squeezes. Watching for now. VIX also trying to turn down.
I'm admittedly running a bit on empty heading into the PM session given the long night session with only a few naps, so the thought process at this end is to stay out of trouble.
2:51pm Shorts getting squeezed. Still cautious here as I'm not particularly focused and need to find another gear if I'm to trade this aggressively.
4:15pm Not a big surprise (Note 2:27pm comment). Considering how tired I was and the huge potential for liquidity-providing locals to get killed on the squeeze, this extremely tough grader is going to give himself a rare A++ for both market read and staying out of trouble throughout the day ... and especially on the late PM climb. I actually even managed to grow the chip count a bit more by scalping clear extension and pullback extremes to end +$14K on the day.
For those new to the blog, I don't typically make much $ on strong trends ... which is the case for most liquidity-providing members of the exchange. The morning after the trend is typically when we do well, and I'll need to be on my toes tomorrow, especially with the FOMC decision looming.
For me, today was about avoiding potential landmines -- both during the Globex and regular sessions -- and not about profit maximization.
The modest chip gain was a bonus.
Check back later tonight for a video with additional thoughts on today's action.
Monday, October 27, 2008
At this end, I felt I read the market fairly well today and have continued to fade TICK and price extremes against larger trend supports with a fair degree of success. And considering my tendency toward poor Monday performances, I chose to keep sizes light and pass on what I considered more marginal liquidity-providing trades (although my reads seemed strong on those as well), and carved out a decent, albeit not overwhelming chip gain of +$14K.
Yet considering this week's earnings and FOMC landmines, it's an acceptable start and I expect to continue to play defense much of the week.
Now all I have to do is believe I got scorched today to avoid potential Tuesday blues.
4:06pm P.S. Guess I spoke too soon. No damage done here though ... chips tucked away.
Sunday, October 26, 2008
Dangers of Managing "To" Statistics - While I'm going to wait for December 31 for a full lookback at my 2008 statistics (again, I find them to be more of an amusing after-the-fact anecdote than anything, and even then it will be less than a 5-minute exercise and not be particularly important), I thought it might be helpful to use my 2008 stats to date to reinforce a few points regarding the relevance -- or lack thereof -- of looking at performance on specific timeframes.
So let's start with the data, noting the timeframe, relevance, and 2008 win vs. total:
Specific Trade - Completely Irrelevant - Not tracked
Day - Largely Irrelevant - 78% (164/209)
Week - Somewhat Relevant - 91% (39/43)
Monthly - Relevant - 100% (10/10)**
Quarterly - Highly Relevant - 100% (4/4)**
Annual - Critically Relevant - 100% (1/1)**
** Period in progress; Data reflects performance through last Friday
And while we're clearly missing an important piece of the analysis, which is dollar extent of the gains & losses ... an analysis of which I'll defer to 12/31 (in the meantime, the previously posted month-end equity curves provide clear clues, and yes, one large loss can negate a 91% win/loss %), here are some observations.
First, I consider the first two timeframes to be pretty meaningless as I don't focus on them whatsoever. And while cumulative performance as reflected on larger timeframes clearly wouldn't occur without some decent performance on these micro-timeframes, it's more a matter of "they are what they are", versus "I need to manage to them" ... i.e. "I'd better make damn sure I don't end this trade or day with a loss."
And that's where I believe many newbies and losing traders -- including this trader when he was a newbie many moons ago -- lose their perspective in the heat of the battle. For there's a huge difference between trying to manage to a desired statistic, versus looking back at stats as interesting after-the-fact sidebar. Pursuing the former leads to misplaced actions such as doubling down where trade premises have clearly busted and last hour revenge trading when faced with a potential day's loss.
Second, it's interesting to note that the daily and weekly win/loss %s are about where I would expect them. Again, there's been no trying to manage to them ... the #s are what they are -- a simple fallout of performance. They just happen to make sense in the scheme of things.
I've mentioned many times that former Engineers, Accountants, and Statisticians typically make terrible traders. And that's not meant to be disparaging at all, as I have some Accounting blood in me and once had the world's best accounting of a losing trading business. It's just that those that succeed typically do so in spite of their past talents, not because of them.
There are several reasons I keep that December 31 countdown to the left. The main reason is that on that day, the year's "trade" will be closed. Yet even then, 2008 will reflect a small subset of one's "career" trade, which in the end is the only trade that matters.
Perhaps we should keep that in mind when slipping into anaylsis paralysis when determining whether our ES pullback entry in a 5-min trend will be a win or loss. React, and the results will take care of themselves.
Enjoy the rest of your weekend, and we'll open up the PalTalk room at 6:30pm ET tonight for virtual drinks at 7pm.
Saturday, October 25, 2008
Friday Night Video - In case you missed it, here are some closing thoughts for the week. And yes, I need to cut down on the Burger King meals.
"No One's Making Money?" - I'm frankly getting tired of all the recent press -- including various online venues -- that keep stressing that no one's making money in this trading environment. Well, in the world of futures, there's always a wealth transfer from the majority to the minority in play, so someone is making money.
Yes, there's no doubt the rhythm of the game has changed drastically, and we all know it took me some hard lessons and steep tuition during a few sessions this fall to figure some things out in this new environment. Yet the game hasn't changed. We're still playing Monopoly and someone still wins ... it's just that the dice rolls are occurring at a record pace.
History has shown that most of the "no one's making money" comments are coming from losing investors, traders, columnists, and especially horse-calling chatrooms as self-justification to try to retain traders when their particular "methods" suddenly stop working (big surprise ... more on that below).
Well, how about successful traders (real traders, not Wizard of Oz "you can't see what I'm doing" talking mouths) banding together and sharing the knowledge?? I don't know about you, but I can't stand people who whine. I do thoroughly enjoy the company of professionals and apprentices who freely share their continuing thirst to win the game ... regardless of its pace.
To that point, please keep the comments coming, spread the word to your trading buddies, and let's keep the positive vibes flowing for everyone so we continue to win whatever game is placed before us. Because apparently, much of the rest of the world simply wants to moan and groan ... or sell products.
"Systems" - Back to hyped methods, this environment is another great example of why the same method or system doesn't work continually over the long run. That's because the rules of the game are continually changing, and the only way to win is adapt to the evolving rules.
I'm not sure about you, but I don't want my pilot relying on auto-pilot to fly the plane I'm riding ... especially when taking off or landing through changing winds. I want him/her to rely on strong judgement and experience and make the best decision possible under whatever conditions are present.
Too often, by the time a system is developed, backtested, and marketed, the winds have changed. Sort of like being the last one on the bus by buying the market long-term in the late 1990s. I can't wait for the "How to Trade the VIX over 50" book to come out, just in time to see it back under 40.
My personal view is that systems and chatrooms appeal to the inner lazy demon that lurks in all of us. It's an easy way to shift of accountability away from ourselves and allow us to blame something/someone else. Unfortunately, that's become the American way for too many these days. Whatever happened to personal toil, perseverance, and sacrifice??
More Good Stuff From Dr. Brett - Back to the topic of those making money, here's a great post from Brett's site on Friday discussing trading behaviors among those making money now. Keep in mind that he helped fertilize this year's Bamboo tree long before it ever broke ground. I can officially give you over a Million reasons why he continues to be a class act in an industry full of clowns.
Maximizing Momentum - One of the reasons I refuse to take a prolonged break -- despite many comments saying I should consider it -- is that the overall momentum is still in my favor. For despite the occasional hits, the direction remains forward.
Right now there are only three things that will force me to consider taking a break: (1) a major health crisis (death comes to mind), (2) a prolonged losing streak (say, more than two days), and (3) December 31, 2008. Until one of those things happen, it would be stupid to stop this year's momentum as we near the bottom of the mountain. Yes, I mean bottom as in a snowball that's careening down.
And no, I don't believe in superstition or jinxes by mentioning options #1 and #2.
(Knock on wood.)
Enjoy the weekend.
Friday, October 24, 2008
I actually got a very restful sleep last night, versus Wednesday night's toss-and-turn marathon. When I awoke and saw the lock, I decided to play it slow today -- and simply keep moving forward by limiting any trading to high-probability spike fades in this thin market.
Possible 5-min head and shoulders here that might take us down yet again. Nibbling on short.
12:29pm Nice. Got +4.5 on best cover (73.25 to 66.75). Only had 10 on. Not sure I'll trade much for the rest of the day as I'm now in major week chip preservation mode. Day chip count now slightly over $8K.
1:13pm zzzzz. I'm actually glad to see the market not moving. I imagine I'm not alone as recent daily charts are screaming trader exhaustion. 5 min ADX under 9 though on no volume, and we might still get an afternoon push.
1:20pm Here we go ... market trying to break upwards.
1:32pm Well, that didn't last, nibbled on pullback but scratched when no further thrust. Might be a fake and elevator drop to continue the hourly downtrend. Frankly, it will shock me after that if ES closes on its highs.
1:39pm Caught short scalp using the "If it ain't going up" theory.
1:50pm And again (65.50 on pullback to 61.00). Keeping sizes extremely light (5-10 contracts) to balance protecting gains with taking advantage of opportunity. Plus, this market remains as thin as wax paper.
1:55pm And again (65.00 to 62.75). Shorting every pullback and taking it out on the drops. Chip gain up to +11K on only 356 x 2 contracts. Efficient.
2:02pm Trend remains down, but the trade remains very thin. Going back into watch mode.
2:18pm OK, the market is officially chopping and I'm not going to do anything stupid, so that's an official wrap on the day and week.
All in all, pretty decent judgement over the last two days, and the week's daily chip counts end up -1K, +10K, -8K, +45K, +11K for a respectable +57K. Yet there remains plenty of room for improvement, especially when you drill down into Wednesday's box score of sloppiness and frustration. That still doesn't sit well with me, and as long as it doesn't, that's a good thing for my trading. To beat a dead horse, complacency is the killer in this business, whether it sneaks in during a trade, day, week, or month. And the killer must be avoided at all costs.
This leaves one week to go in October, then two short months (especially considering the Holidays) to the finish line which is beginning to come into view. The Q4 bonus tally to the left will be updated to reflect 97% shortly, which depending on where that stands next Friday, could set up the final two months of digging as free-roll on top of free-roll. It also means I may have again underestimated the extent of this year's Bamboo growth, and may have to raise the bar yet again.
But let's not get ahead of ourselves. Five more days of digging and a lot of work remain before we can close the month and head for the final two turns. And there will likely be more earnings landmines to dodge next week.
And so another two days off before the journey continues. This amazing, indescribable, frustrating, wonderful, get-punched-in-the-face, get-back-up, tiring, rejuvenating race of the century.
What's done cannot be undone, and all eyes are on the road ahead.
The dealer returns on Monday, and the chips had better be ready.
I'll post a video later tonight along with the Weekend Trader posts as usual.
Thursday, October 23, 2008
Result: Solid $45K net chip gain on 1,565 x 2 trading -- including $9K on the DAX on a very solid performance in the early session and $38K on ES before commissions -- and no errors that I can recall, aside from leaving some profits on the table and passing on a few decent entries -- which I can more than live with today.
I've preached for years that trading is a sport ... and the last two days provides yet more evidence for those who think trading is just about chart patterns and analytics. It may not be a physical sport, but the required mental element is no different ... not to mention we make and absorb punches every hour of every day.
Today again also proves that I trade better and in a more focused state when angry. I guess that's how it will always be.
The only thing I can't figure out is why my hands smell like raw meat.
Yet most importantly, the more I tossed and turned last night, the more I realized I've accidentally slipped in to "Ivan Drago" mode lately, including when he finally gets cut and the announcers scream "The Russian is bleeding" and when Duke says to Rocky, "He's worried! You cut him! You hurt him! You see? You see? He's not a machine, he's a man!"
Wednesday, October 22, 2008
On this October 22, 2008, after 295 days and well over the annual $1M target, I'm simply spinning wheels and treading water now ... and am not happy about it. I traded the last hour horrendously after a strong morning -- even in a pace for which I'm very well suited -- and am now back to a scratch for the week.
It's completely unacceptable, and I have to make some clear decisions before moving forward.
I'm not sharp mentally, and am clearly getting extremely sloppy and complacent.
I know subconsciously that I'm letting up and coasting ... exactly what I didn't want to happen.
I need to make some tough decisions.
No PalTalk tonight as I have another obligation.
Tuesday, October 21, 2008
Like poker, changing gears is important in this business, and I didn't do it very well today. For example, I felt myself coasting when stepping on the accelerator was more appropriate. The more time I've had to reflect on the day, the stronger I feel about that, especially in light of last week's strong week and the current year's score.
Perhaps my concerns are unwarranted given the decreased market volume this week. Yet today's modest results and hesitancy are bothersome enough for me to document it tonight so I remain aware of it.
And again as in poker, the key at this end remains recognizing and feeling the frustration of many traders in the market who have been trying to unsuccessfully trade range breaks over the last two days of marginal volume, and using that to my advantage when the resulting setups occur.
I need to forget about the past and focus on the quote in the top left of this page.
I failed today and need to get angry again. With less than 20% left in this year's game as of tonight, I need to find another gear.
Yet the attached 60-minute chart says a great deal in terms of no trends or extremes on that timeframe ... which usually results in some quick flip-flops on lesser timeframes. The chart also shows the declining volume and ADX which is adding to the lack of conviction.
So the plan for now at this end remains staying on the defensive and not forcing things as the market finds its natural rhythm ... which for now is limited to the lesser timeframes.
Monday, October 20, 2008
The early DAX choppiness was a bit of a heads up for a possible ES slow trade, and I seemed to have heeded those warning signals pretty well as I didn't force anything and simply watched most of the day as I focused my attention on non-market activities. I'm surprised Pat at MF Global didn't call 911 when he saw my light volume.
Of course, we're also in the midst of Q3 earnings releases which will likely provide some abnormal Globex rhythms, and I expect I'll be playing defense much of this week.
Sunday, October 19, 2008
"They are at their best when they are beat up, lying by the side of the road and barely breathing. They laugh at pain. They feed on adversity. If the Red Sox don't fall hopelessly behind in a postseason series every once in a while and live to tell about it ... well, heck, they just don't feel like they've been true to themselves."
In my July 4th post to kick off this blog, you'll find the following:
"One of the things I did at the beginning of this year was to take a hard look at all of my trading shortcomings. In doing so, I discovered that one of my greatest weaknesses was getting sloppy and away from my game plan after a period of significant equity growth. On most occasions, the result was a drawdown and an resulting equity ceiling -- both real and perceived. Yet a decade of history also showed that one of my greatest strengths has always been refocusing and coming back from these times. That is when I've experienced my greatest focus and performance."
In recapping my thoughts on my July performance, especially coming back from the early month draw, I wrote:
"The intense state of focus during that week of comeback activity was just that -- intense. You could have poured hot water on me on any day during that time and I probably wouldn't have noticed."
What is it about the human spirit when faced with gut-wrenching adversity? What allows some to intensify their focus while others wilt? And how do we keep putting ourselves in such adversity in the first place??
I wish I knew the answers ... especially to that last question! Yet perhaps it's part of the master plan for us not to. All I know is all of these quotes describe the #1 reason -- far above all others -- for this year's Bamboo performance at this end, which is to essentially mentally bypass the adversity by believing it had just happened.
And no, it of course doesn't work all the time, and I've had at least three significant chinks in the armor this year. But I know with all my heart that it has worked sufficiently enough to have caused this year's exponential growth in my equity curve.
We'd be kidding ourselves if anyone thinks this blog could turn any of us -- including me -- into never-lose trading robots. It simply ain't gonna happen. Yet I do hope it stirs reflections on your own businesses and lives.
Perhaps Jimmy Valvano said it best in his stirring speech in 1993 when he accepted the Arthur Ashe courage award:
"(in describing his Jimmy V foundation) ... its motto is "Don't give up, don't ever give up." And that's what I'm going to try to do every minute that I have left. I will thank God for the day and the moment I have. Cancer can take away all my physical ability. It cannot touch my mind; it cannot touch my heart; and it cannot touch my soul. And those three things are going to carry on forever."
Trading and baseball clearly aren't as serious as cancer ... and perhaps it's inappropriate to even try to link them.
Then again, maybe not. Perhaps if we did take parts of life as seriously, we'd see dramatically different results and be able to more thoroughly enjoy the time we've been given on this planet, while sharing the rewards with others.
At this end, I know I'm not alone in my journey. Too many things have happened in my life to believe otherwise.
And maybe that's the most powerful concept of all ... belief.
A reminder the PalTalk lounge will be open tonight at 6:30pm ET for virtual drinks at 7pm, and we'll keep it open until the ALCS Game 7 starts at 8pm.
Saturday, October 18, 2008
Weekend Video - Here were some thoughts from last night in case you missed it.
Continual Improvement - Yes, it was a good week -- which as I mentioned in last night's video, means squat heading into Monday. Yet there were enough cracks that will give me something to work on, including making sure I'm acutely alert when I start both the day and week. It's become blatantly obvious over the years that trading the day's initial trade and Monday in general are two of my weaknesses. Additionally, I need to work on taking every entry that presents itself, as I found myself hesitating a few times on some prime entries this past week.
Process of Elimination - I've found that if you eliminate everything that doesn't work, often all that's left is what works. It's the old "Edison didn't invent the light bulb ... he just found a zillion ways how not to" theory. The key can be making sure you survive learning what didn't work both mentally and financially.
Given my makeup, I had to learn for myself what didn't work and paid a lot of tuition. Such "investment" is of course now paying large dividends. Yes, I initially read books and tried to absorb some of the quality teachings out there, but as I've said before, experience is the only true teacher -- and there's no way around the fact that some of it will be costly. And while I'm hoping this blog can stimulate ideas for people looking over my shoulder that can cut down on the cost, nothing on this planet will eliminate it.
As I mentioned in Wednesday's PalTalk lounge, things I've eliminated over the years include scalping stocks (that game ended when decimals replaced fractions), paying excessive retail futures commissions that didn't match my style, trading currencies, not having a supplemental income to pay the bills, and not adding to a position upon confirmation of a strong initial entry.
And I still learn and pay tuition every day in the form of missed opportunity or less-than-optimal trading sequences. It's just that those costs are typically exceeded by the intraday successes.
Thanks Deb - This blog wouldn't be nearly complete without my mentioning the strong support of my wife Debra. For 23 years, she's stood by me in thick and thin, and kept me out of the funny farm when I went through my initial trading struggles. We had lunch together yesterday where for the first time this year, I shared some details as to the status of this year's race -- which isn't over yet. She's a gem, and will be largely responsible for whatever the final score is on December 31.
Persistence & Tenacity - If I had to mention the top attributes of a successful trader, it would clearly be a never-say-die persistence and tenacity -- in both the short and long run. I mentioned recently that if the market wants to really kill me -- and it's wounded me plenty at times -- it had better make damn sure the pulse is gone.
And the Rays had better make damn sure the ALCS doesn't go to a Game 7.
Q4 Bonus Update - I updated the Q4 bonus attainment score on the left to 74% ... 18 days into the quarter. I'm thinking that should I exceed 100%, the year-to-date earnings mark at that time will become a clear trailing stop on earnings for the year, and I'll have to come up with another carrot -- perhaps in the form of a second bonus -- to keep me focused for whatever time remains in the year. Yet I'm well aware it will only take one poor trade or day to drop the 74% back to zero or worse, and so I have to maintain both my focus and momentum.
Resetting the Focus - Yes, here we go again. At this end, Monday starts fresh, and I again find myself having to play from behind. The French guy is still winning in the swim lane to my right. (Will I ever catch him???)
I don't want the bronze or silver. Not this year. I'm too close and this opportunity may never present itself again. I have to dig deep for 74 more days. It's not about greed ... it's about reaching one's fullest potential. I want to make every ounce of sweat and preparation over the last decade worth their costs.
These are turbulent waters -- pun intended -- and I've got two days of R&R to recharge the batteries before resuming the race.
Enjoy the weekend and I'll open the PalTalk room Sunday night at 6:30pm ET for drinks at 7pm.
Friday, October 17, 2008
Please note that after I recorded this, I realized I wanted to more fully link the concepts of (1) fading immediate trends and (2) using trader emotion to my advantage. Essentially what I meant was that when the primary market participants left driving the trend extreme are those trading on pure emotion (pain, fear, greed, missed opportunity) -- as was the case at the 1pm exhaustion point -- then I'm usually taking the other side as the market corrects, and that's where the bulk of my income is made.
2nd biggest playoff comeback ever. Largest since the early 1900s. One of the best Sox games ever. And we're sleeping on the "T" (Boston's subway) during the comeback, and listened to the final hit on the radio.
As much ribbing as my friend and I have taken, everyone has told me they would have done the same thing. Plus, we were exhausted from our respective crazy schedules. And I wanted to be alert for today.
The net result? One pissed off fan, but a solid $26K Friday chip gain due in part to a decent alertness that I wouldn't have had if I hadn't left when I did.
I've said all year that this year was one of sacrifice and focus. You have to do what others can't or are unwilling to do. Last night, I made a sacrifice. It hurt. But it hurts a lot less now.
I think it's the little things in the business that mean a lot. I was tired all day. But it was a manageable tired ... and exhaustion didn't set in until now as we pass the 3:30pm mark on a Friday. I didn't do anything dumb today, and even traded the 2:30pm - 3:30pm market whipsaw well.
Most of my trade entries were fades into trend support (including the opening 15-min support from Thursday afternoon) or unsustainable pushes, and I often clipped 1-4 points in this market which continues to provide incredible price volatility.
At this end, the week began with a -$11K chip hit ... and it ends with a $116K net gain.
The Sox head into the bottom of the 7th losing 0-7 ... and win 8-7.
I guess we both had them right where we wanted. When we both eventually go, it will be kicking and screaming. But you'd better do your best O.J. impression, because we don't die easily.
And so the journey continues ... for both the Sox and me.
I'll post a video tonight. Just please pardon the bags under my eyes.
Thursday, October 16, 2008
Some day, this market dance will change. Monster trend days followed by monster morning-after-trend oscillations will slow down in frequency and intensity. Some day. In the meantime, we eat off the menu provided.
As is the case with most traders, I tend to trade certain patterns well -- and as everyone who's been following this journey knows by now, it's the morning after a trend day. And as I've also stated -- including in last night's PalTalk lounge -- I tend to trade well after having missed Globex opportunities. Both were the case this morning, and I'm frankly a bit reluctant to log the chip tally thus far which clocked in at +$52K. And given the morning take and my typical el-stinko afternoon performances, I've shut down trading for the day. I'm also tired.
I'm admittedly starting to get concerned about remaining humble right now. Then again, I suppose I only need to look back less than two weeks when I got hammered to the tune of -$94K before I finally figured out the "VIX over 50" market ... and that should keep me humble for the rest of my life. The key that day was survival and simply focusing on getting back to work. And now, for the third time since that happened, the day's "trade" will show a chip gain exceeding $50K.
I recognize the current rhythm is tricky and difficult for many. And while it has been for me at times as well, today's stage was again set for the typical morning-after-trend action, and it worked out well as I bought the first move down, shorted the first move up, bought the late morning range break to the south, bought almost every extreme -1000ish TICK, and shorted a couple of TICK retracements toward zero (when we were downtrending in the early AM) as well as a few extreme +1000 TICKs (when the market turned to its uptrend in the late AM).
I honestly don't know what I've done to deserve the blessings of this year -- especially when so many others are struggling. I spoke with Pat Lafferty at MF Global (my broker and THE best in the business without doubt) a few minutes ago, and we talked a bit about the rough road that many are having. He reminded me that I've paid over a decade of dues, and perhaps that indeed helped fertilize the unseen roots of the Bamboo.
Perhaps I'm not supposed to understand it. All I know is I'm just trying to do the best I can, improve day after day, and give back to the industry by being generous with my thoughts for those that are struggling.
I don't have all the answers and am no guru. Like life, there's no instruction manual.
I'm just trying to figure this out as I go along.
Please note I'll be at the Red Sox game tonight (for the funeral) so I'll post submitted comments later tonight or tomorrow morning.
Wednesday, October 15, 2008
Perhaps it was for the best as I avoided potential losses that might accompany less than optimal focus ... especially during the late day decline.
Call it a "day off" of sorts ... which I suppose beats an "off day".
A reminder we'll open the PalTalk lounge tonight at 6:30pm ET. I'll be in the room by 7pm.
Tuesday, October 14, 2008
As I do, please keep in mind as always this blog remains my "diary", and that I'm not providing trading advice. Having said that, there are no doubts these are extreme times ... extreme as they've ever been as evidenced among other things by a record high VIX and Dow & ES moves on Friday and Monday that completely obliterated previous records for movement in a day (Friday intraday range record & Monday a net gain record). In fact, according to Briefing.com, prior to Monday, the Dow's record point gain was +499 in March 2000. I believe there may have been a couple of higher % moves, but you get the point.
At the risk of stating the obvious, these are times no one has ever seen. Ever. And I've gotten caught at times. I had a 5% nick in my capital to start last week, and while I've fully recovered and more, have scrambled over the course of the last month a helluva lot than I'd like. Like many others, it has taken me getting whacked on the knees Tonya Harding style at times to keep this year's Bamboo Tree growing. In doing so, here are some lessons I've learned and adjustments I've tried to apply given the current environment.
Sizing - My largest loss a week ago Monday was largely the result of inappropriate sizing as the market was moving against me. That opening 90 minutes had to be among the most sustained selling ever at the open. I haven't traded close to that size since. The only way I've felt comfortable putting any size on lately ... and it's been rare ... is to put a partial position on and add slightly if the trade appears strong and begins to move in my direction so long as there's still adequate profit potential at the point of the second entry. By the way, while I haven't made much over the years trading the DAX, I firmly believe that trading it has greatly helped me adjust to the current ES pace.
During last Monday's personal debacle at the open, I had 500 contracts on at one time. For Friday's open I had a maximum positon of 90, and at today's open I only had 30 on.
Risk Management - Point-based stops are pretty useless in this environment, and if your initial entry is at a less than optimal wholesale entry point, even worse than useless. I've tried to manage by looking for "zones" of entry and through reduced size.
Chart & DOME Management - At various times, I've had to shrink my DOME to only show every other price Tick, or every fourth price Tick (a full point for ES) as well as adjust my 1-minute chart to 2-minute or simply ignore it and focus on the larger timeframe charts. Today's open was a good example where the gap up was clearly a pullback in a longer downtrend, and the lesser charts weren't as important aside from the smaller timeframes confirming the opening move south.
I've also found three line break charts helpful in filtering out much of the noise. Keep in mind 3LB requires a sustained trade above or below the current trend parameters to reverse, so a whipsaw 4 point swing that doesn't hold doesn't change the current trend in play ... assuming of course the market is trending on that timeframe, which it may not. Having said that, if one is fading extremes on clear overextensions -- a dangerous game at times in these conditions where extreme gets redefined hourly -- 3LB will always be against you. For example, the 1-min didn't turn north on Friday's open until ES had bounced significantly off the bottom.
I mentioned in the video the other day that sitting out "was and wasn't" an option ... with "was" being a possible scenario it we felt we couldn't trade a certain market. Perhaps keeping in mind the market will always be here, and that -- depending on our age -- we have thousands of days to trade over the course of a career will help us maintain the proper perspective in the current environment.
For the nimble, the current opportunities are there as emotions are at their historic peak. However, it only takes being being slightly off our game or one distraction or wrong move for opportunity to morph into losses which can easily accelerate as frustration and the market combine to provide a double whammy. That alone though doesn't make us "bad traders" ... I consider myself to be a good trader who makes occasional bad decisions.
These are historic times where defense may be more important as offense.
The market will always be here.
At this end, I traded both long and short, with most of the morning's $40K chip gain coming from shorting the opening gap and adding upon confirmation of the initial turn. I could have sized stronger at the open for a home run, but instead opted for modest size and the solid extra base hit as I wasn't as focused as I would like to start the day. I mean I was focused, but not with that added element where I'd be comfortable trading mega-size.
So the week chip counts start: -$11K Monday (playing defense on low probability trend day) and +$40K today (playing offense on high probability morning after trend), or about what I would expect from a win/loss ratio perspective given the two types of days, and I remain pretty pleased with how I managed yesterday. I'm sure many "the S&P NEVER climbs 100 points in a day" traders got torched. Sure, it hasn't happened before and probably won't ever happen again, but that's still not "never".
1:06pm Not sure I'll trade much this PM as the afternoon of the oscillation day is typically a crap shoot at best. The daily downtrend could certainly resume (ummmm, yesterday's 100 point move and the overnight gap was a pullback on a daily downtrend as noted in the chart), but I'm a bit tired and still don't feel particularly sharp. Putting the defense back on the field now and not giving away the morning's work.
3:34pm OK, calling it a day. Nudged the chip count to +$44K by shorting the PM breakdown and then doing some light buying on the 3LB turn north. Very pleased with overall management the last two days. Earlier in my career I would have gotten hurt yesterday and then been too pissed off to trade today well. A decade of experience taught otherwise, and "Day 2" is when I make much of my keep.
I'll do a video shortly on my strong feelings of why "Day 2" is so much more predictable than "Day 1" ... Day 1 usually being the trend day. I find it's often best to simply let "Day 1" happen without major damage.
Also made another decent dent in the Q4 bonus which shot up to 41% complete with 2 1/2 months still to go.
Monday, October 13, 2008
At this end, I never could find my rhythm until late in the day (the 2:55pm bull cup helped which finally provided some market pace) -- the low Holiday volume didn't help -- and settled for a low five-figure draw due mainly to high transaction costs and a DAX sequence that caught me a bit. While I'm not particularly pleased with the effort, I'm OK with the result as I expected a draw today, stayed out of major trouble by keeping sizes down, tried to minimize it to the extent possible, didn't give up, and had a couple of nice late afternoon sequences. Plus, most liquidity providers don't plan on making money on strong trend days, never mind when the S&P is up over 120 points on the day.
It's amazing how one can get so used to a rhythm, that even knowing the change is coming and seeing the change in tide (TICK above zero; downtrending 15-min VIX), the feet sometimes keep dancing to the earlier tune.
There's no question I could have adapted better earlier. My reads were pretty good ... it was my feet that initially kept getting in the way.
So we'll give this day to the investors. They needed a respite during this year's continuing bloodbath which isn't likely to let up. I'm keeping an eye out for possible "morning after trend day" action tomorrow and will need to be on my toes.
Saturday, October 11, 2008
Nothing But Net - You know I detest looking backwards at detailed trading statistics, only caring about looking forward with a clean slate. Yet I wanted to use last week's events to reinforce two points, which are (1) all I care about is the bottom line, and (2) I define a "trade" as the net result of a day, week, month, year, etc.
And this is where there is so much misinformation out there, it's sickening. I'll be clear - you can't micro-manage this business. I've worked with a number of engineers and analysts who simply can't see the big picture and only care about looking at their statistics. Those few that do succeed do so not because of their skill at gathering and analyzing stats, but in spite of it. And yes, in my early years, I had wonderful statistics -- sliced and diced a dozen different ways -- to try to get a handle on my performance. I had an incredible array of statistics ... and a negative bottom line.
At this end, the statistics and micro-aspects of last week's events don't mean anything ... the bottom line does. The week was nicely positive despite daily "trades" revealing one horror show (worst $ loss of the year) on Monday. Friday was nicely positive (3rd highest $ gain of the year) despite the majority of my trade sequences being negative. Yet for those insistent on looking at stats, here a few to ponder:
I had 115 sequences on Friday and it was one -- 0.87% of the total -- that provided over half the daily take. 61 of the 115 sequences were negative -- for a 47% win/loss percentage. These stats fly in the face of the cottage-industry trader experts who glue a shingle onto a website and tout win/loss %. As traders we have two choices: (1) have a library full of data to dissect, review, analyze, cuss, and discuss ... or (2) develop a never-say-die trader's mindset and focus on taking shot after shot and varying size to our advantage.
Passing the Train Wreck - A related thought stemming from last week is that we can't focus on the past and have to keep looking ahead -- on a second by second basis. Have a bad month last month? Get over it. Have a bad week? Get over it. Have a bad day, start to the day, or trade (using the common definition of "trade", not mine)? You get the point.
I said last week that my Monday result would have destroyed most. And frankly, my early Friday sequences would have caused most to fold their tent and call their shrink before the day session was 5 minutes old. Friday morning indeed wiped out many traders ... that is, those who were still standing after the first four days of the week. I'll go even farther by saying that my trading for parts of Friday, last week, this month, and this year has absolutely sucked and has been atrocious -- and I mean that in all seriousness.
We can slow the car down, look at the train wreck, and as a result likely cause another crash because we weren't focused on the immediate road ahead. And there were trains off the tracks all over the place last week. Or we can look ahead. It's our choice.
Strength in Weakness - The S&P is down 38% for the year. My fund is now up 147% with the initial crazy $1M 2008 target now serving as a trailing stop on the year with two & 1/2 months still to go. The results aren't because of how good I am, but because of how weak I am. I'm human and have a lot of weaknesses to overcome ... hour by hour and minute by minute.
Counting Down - The ticker says 81 days to go. 81 days of fighting and clawing to overcome everything the market is throwing at us. 81 days of dodging and weaving around the landmines. 81 days of overcoming our individual and collective humanities. Then we'll score the year once and for all.
I'm already starting to think about 2009 and another "game" to keep me motivated. And as I've said recently, if I attain the extra $250K 2008 bonus, I'd like to do something big to give back to an industry that schooled me for a decade so I could absorb and sidestep this year's punches in this market fight of the century. Like Barry Greenstein in the poker world, I want to share the rewards. I have enough.
Whatever I do in 2009, when they finally carry me out in a box some day (boy, I hope I will have closed my last open position when that happens), I'm hoping documenting this 2008 journey will have have helped inspire those who have joined me.
Edwin Lefevre said on page 131 of Reminiscences of a Stock Operator (a classic), "If I knew how to make these statements stronger or more emphatic, I certainly would. It does not make any difference what anybody says to the contrary. I know I am right in saying these are incontrovertible statements."
I feel the exact same way about every letter and word typed here since we began the trek in July.
I'll post a video shortly and will also be in the PalTalk lounge tomorrow at 7pm ET.
Enjoy the weekend.
Friday, October 10, 2008
Where the hell do I start? First the daily chip tallies for a week that none of us will ever forget:
That much you already know.
Then comes Thursday at -$4K and today at +$57K (I updated this # after I wrote everything below). But we need to dig deeper into the box score of the last two days to get a true appreciation for my attempt at riding the roller coaster.
We'll start with Thursday in which I had a solid morning and then gave back the gains on the market's late afternoon belch ... which at the time -- let me repeat that -- at the time most of us thought was the final capitulation. Yea, I know I don't normally trade late afternoons. But the afternoon meltdown really felt like the big one. Suffice it to say I escaped the day with no gain and no pain. I still can't believe the VIX is 73 as I'm writing this.
Then comes today which made Wednesday's "monster of all day after trend days" look like a kitten. Actually, "today" started last night when I had to pick up a relative at the airport and wanted to put a small swing position on at the close after the 600+ point / 7%+ Dow vomit. So I got to Logan at about 6pm and bought ES at 908 (15 contracts) with a planned exit in the 920s on an overnight reaction back up. I watched it for a while ... trading up to 915ish ... but decided to simply let it cook a bit for a while (keep in mind it was a small position for me). Then we stopped to eat on the way home where I peeked at the position and it was still holding 910 or so and I felt good with the entry. Then we drove home and an hour later I sat down at my station to see the market gave it up again ... to the tune of the 880s.
At that point I proceeded to minimize the damage by scaling out into the moves up and actually did pretty well navigating through the storm so to speak.
Then after two brief naps overnight, I nibbled a bit in the pre-market and did OK and again wanted to put a small long ES position on before the open and again saw the market give it up on a Wile E Coyote dive.
Then (catching my breath as I write this), I go long right at the bell, see ES spike 10 points or so, take off half for 8 or 9, buy the first pullback with the lot I'd taken off for the prior gain, after which ES decides to completely ignore the VIX and barf yet again through its opening price to the tune of 30 points ON TOP OF the gap down.
All I could do at that point was wait for the eventual pause and buy the daylights out of it ... which I did after a few probes and stops, with the best and final price of 839.25. From there I scaled out for +10 to +20 which finally put me back in the green for the day, and more importantly FINALLY got me in rhythm with this damn thing ... which led to several sequences of 3-6 points throughout the day and has led to the decent day's take.
1:54pm Some TICK vs. price strength divergence on that last drop ... could we finally be seeing the b ... b ... b ... bottom? I'll be shocked if that isn't the low. Yea, I know I was "shocked" on Monday and this morning. VIX at 75. Cruel.
2:02pm Bought the post-divergence pullback at 46.50. Small size because I'm exhausted.
2:05pm Flat.. best price 58.75. I'll post a pic of that divergence over the weekend.
Might be another buyable pullback coming, but I may just watch it from here. Did I mention I'm exhausted? Shorts are likely exhausted as well, so this could push big time if we get any momentum on the 5 min.
2:54pm Tried one last minor pullback by but scratched it for small loss. Small size. If ES loses 41, I'll indeed be shocked again.
3:11pm Shorts scampering ... asks disappearing. Not stepping in front of this possible train and way too tired to time pullback longs on any climb. Billlllly, don't be a hero, don't be a fooooooool with your life.
3:18pm I lied. Caught 87.25 to 81.75. It had reached the "stupid not to take it" price. Small size (ten).
3:22pm VIX finally breaks 15-min uptrend with less than an hour to go. Cruel for those having left early for the long weekend.
3:44pm Caught some of that last power pullback for a final chip.
Whew. My goodness.
I'll be clear ... for most of us, this week was about survival ... period. Those who survived the week (few and far between) will live to trade another day. Those that didn't will be replaced by others, some of whom will make it and most of whom won't. This business is a war of attrition, and the chips go to those who survive when others are getting slaughtered. Chips are always trasnsferred from the large number of losing traders to the small number of consistent winners. Although my broker just emailed me telling me that many good traders got killed this week.
At this end, the weekly score will show a $40K chip gain and a decent dent in the year-end $250K target bonus. But it could have been higher as the box score is another story, as I was early more often than A-Rod peaking before the playoffs (apologies to NY sports fans) in this market where the term "extreme" gets re-defined hourly. Fortunately, I was able dodge the carnage that's lying everywhere and managed well enough to live for another week. I realize many others aren't as fortunate and feel their pain. My parents -- and their parents before them -- had AIG and all the banks in their portfolios.
I'll post a video over the weekend ... after I recover from the motion sickness.
A reminder we'll open the PalTalk lounge Sunday evening at 7pm ET. We had a great time Wednesday night as about a dozen folks (including one on a train!) talked about everything from my Monday brain cramp to New York sports fans. All are welcome.