Monday, December 22, 2008

Monday Notes - "Vacation" Trade

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

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

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

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

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

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

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

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

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

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

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

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

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


E-Mini Player said...

+$5K on a "vacation" day...not bad at all! :)

J. Scott said...

Hi Don,
Caught your blog after another TradingMarkets contributor referenced it. I like it and hope you will provide the opportunity to continue to follow it for a while. FWIW, I’ve enjoyed it because I’m about ten years behind you wanting to escape a successful career in corporate America and pursue my passion of the markets and trading. Navigating this industry amongst the dishonest is perhaps more difficult than trading itself.
You’ve mentioned that trading can be a lonely endeavor. Try being a wanna-be trader with virtually no support network. So, you’re blog is probably more important to others than you realize.
This may sound weird, but I want to do what you've done, no matter what it takes.
Good luck in 2009.
J Scott

Anonymous said...

Hi Don

Just watched your 12-18 Video. To answer your question YES please continue the blog and the videos. There are so many "plastic" traders that can do no wrong that do nothing to help those of us that are (still) beating our head against the wall. Your candor and openess is an inspiration and an ecouragement.

Don Miller said...

JScott -

Sounds like a great attitude ("no matter what it takes"). And I'm only too well aware of the industry skeletons (check out the 12-13 "Wish List" post and comments).

As you scan past blog posts, you'll see lots of personal blood spilled. It's not an easy road and most fail as I've found trading to be one of the toughest endeavors one could ever pursue. It's certainly far from the glamour that some make it.

Yet perhaps if we accept that as the true underlying premise, and STILL choose to want to make it happen, then perhaps we have a chance.

Best wishes and we'll see you "around the blog".


Don Miller said...

Norman -

Thanks. Candidness will never be an issue and I'm sure there are some that would wish I'd go away.

Yet remember what happens to plastic under heat ... it melts.


Anonymous said...

Hey, Don:

I wanted to relate a personal story only to illustrate how important your blog has been to me this year.

I began trading my own capital in June 2008 after running a hedge fund for eight years. To be honest, I grew tired of trying to continually raise assets instead of being able to focus on investments. In addition I had always dreamed of being out on my own.

It was somewhat of a rocky start. Mental errors, the unique pressure of trading my own account, and tumultuous markets all contributed to several large draws-- one of which approached six figures. It's funny (now), but I'd made many every year managing money (save one), and I could not achieve the correct mental state to trade my own account profitably!

Then, among other things, I started to read your blog. I watched you evaluate yourself every day against your goals. Watching this candid review really struck a chord with me, and I began taking personal responsibility for each and every trade. No exceptions! As a result, I was able to recoup my losses and am on my way to a very profitable year.

Thanks again for sharing your journey and showing us both your successes and more importantly your failures.

Best wishes to you and yours this holiday season.


RexVulgaris said...


Confused by the choice of .5% trailing stop.. I understand the rationalle for protecting the year;1.5-2% I could understand very well. But .5% means you can only really PLAY at the edges through year end.

Also is the .5% a daily trailing stop or a constantly updating real time trailing stop?
ie I will oft use the boob to get a jump start such that my 1st real time trade of the day is 'for free' between my ears. ie. If its a rolling daily stop then an intraday daily lead would allow more leeway in trading that day


Don Miller said...

RexV -

Good question as I don't normally use a trailing stop (trade, day, month, etc) and haven't for 51 weeks this year or in past years. Ever.

Yet I decided for all intents and purposes that my trading would be finished on last Friday as the mental sharpness which is so critical to how this discretionary trader trades had signifcantly dulled as the 2008 race was coming to a close.

So I view the year as done, don't expect to trade at all, and am "unofficially" on vacation. The ridiculously tight stop is my way of making sure the "vacation" happens, that IF I trade, it's with small size, and that zero damage is done now that I'm ready to cross the tape.

As with my ongoing view that each day -- regardless of # of trade sequences -- is a "trade", the stop would be checked at the end of the day, and if I fell below it, it would become the "official" end to the year.

It's certainly not the traditional use and I wouldn't recommend it as a general strategy. Yet I've never been "traditional" and feel it's the best tool for me as I'm now pretty much shut down for the year.


Don Miller said...


Wow. That is a truly incredible and fantastic story, and you've left me speechless (well, almost).

Ironically, I'd have the same problem ... but in reverse. I've been asked many times to manage other people's money (MF Global has brought the topic up yet again), yet my personal comfort level is greatest putting my own capital at risk since I know my risk profile in spades, and have no problem absorbing losses as a part of the cost of doing business.

While I take little to no credit in your turnaround (it's you), perhaps you just needed that tiny indirect reinforcement at the right time to align the gears.

I can't begin to explain how I was stirred to start the blog over the summer. Suffice it to say that it was simply an intensive feeling to do it. It of course remains my personal diary and source of motivation which I openly share. Yet I certainly never expected the outpouring of comments and emotion from readers since it began.

Perhaps it's a decade worth of shared industry frustration all coming together for the good. Who knows.

I'm just glad to be a small part of it.

Congratulations on your new start :-).