Wednesday, December 31, 2008
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.
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
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.
Monday, December 29, 2008
2008 Report Card
Student: D. Miller
Grade: 10th Year
Major: Short-Term Market Trading
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.
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.
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.
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.
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.
Wake me on Tuesday.
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
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.
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
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
'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.
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.
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.
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?
Thursday, December 25, 2008
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.
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 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 TradingMarkets.com 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
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.
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.
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.
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.
Monday, December 22, 2008
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.
3:45pm: 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:
Monday Net Gain: $5,122
Updated Gains: $1,633,321
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
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
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
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, TradingMarkets.com 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
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
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
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.
The final outcome is now out of my hands.
Maybe the true lesson is that it was never there in the first place.
Saturday, December 13, 2008
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.