Sunday, February 15, 2009

The Weekend Trader - A Line I Won't Cross

All - Please note I've made a correction to the first paragraph of this post after exchanging notes with Tim Bourquin, as he's indicated attendance at next week's NY expo is expected to increase. While my broker has kept me posted on the recent expo environment and attendance trend, I trust Tim's response as co-founder of the original Trader's Expo, and you can find his comment at the end of this post. As traders, we're to correct errors immediately, and so I apologize for the misstatement that was based on another source.

As many of you know, one of the annual trader expos will take place next weekend in New York. And while some expos have dropped in attendance reflecting the industry roadkill left from the hollow promises of the late 1990s and early 2000s -- not to mention the slaughter many experienced in 2008 -- Tim Bourquin has indicated that attendance at this year's NY event is expected to increase in part as the result of people deciding to take personal control of their portfolios.

By the way, I find it interesting in that Poker is now going through an evolution of its own, in that after the initial hype and tremendous exposure received in the early 2000s as the result of increased TV coverage, hole-cams, and of course the Internet, most people are discovering the reality that few will ever be able to master such a difficult skill on a sustainable level, despite the hollow promises of Internet sites and celebrity marketing.

Yet back to trading, I'd like to touch on a topic several have referenced since the blog began -- that of my own evolution from a former trader teaching life -- and explain why you won't find me in New York this weekend.

As many of you know, many years ago I was asked to help teach/coach/mentor (pick a word) traders as the result of my personal record. The requests came from chatrooms, publications, and a global trading site where I ultimately began doing a daily column, and later co-developed several trader training tools -- including simulations that I felt had been sorely lacking in the industry. At one point a while back, I was even named "Director of Trader Development" for a brokerage firm, and often spoke at the national expos.

And while I was very proud of the work that had been done in terms of breaking new industry ground related to trader education (which I insisted always include some component of live trading), it was becoming clear to me as time went on that I was bordering on crossing a line that I vowed I'd never cross in terms of morphing into one that was dedicating more time to selling picks and shovels than locating the gold. Frankly, I was risking becoming a pot to the black kettle, as well as converting my house walls into glass, while at the same time maintaining an arsenal of stones.

In addition, as I was inching toward that line, I was also becoming increasingly frustrated with the challenge of teaching traders, as I took it very personally whenever those under my tutelage struggled. Extremely personally, as I felt their pain. For it was becoming clear to me that despite best intentions and efforts, a tiny minority will ever make it in this business. Further, it also became apparent that many people simply shouldn't be pursuing a trading career, and that it takes far more than a book, CD, DVD, weekend seminar, or a year in a chatroom to fully understand what only experience can ultimately teach.

As a quick aside, many of you have heard me say that I pray my kids don't decide to become traders or marry traders -- for as a parent, it would be hard for me to see them go through the difficult times. Yet I've also said should they make their own independent decision to do so, that I'd support them 100% and arm them with the best knowledge base and seat belts possible, including making sure they watched the classic car crash videos from Driver's Ed. And such is how I approached my trader teaching years.

The best analogy I can make to where my career was heading is to that of Howard Lederer who was -- and still is -- an excellent poker player (he's three years younger than me), yet who became more of a businessman than a player as he co-founded Full Tilt and increased his television analyst work. Frankly, our stories and paths are incredibly similar, up to the point where I decided to stare that line in the face, do an about face, and instead rededicate myself to trading. And deep down, I believe last year's personal mission was in part to prove to myself that I indeed could not only walk the talk, but run it at full speed.

So you won't find me in New York selling shovels and maps next weekend.

I'm a trader, and I'll be at home quietly locating the gold and trying to further toughen the calloused hands.

Enjoy the rest of the long weekend.


Dharmesh Kumar said...

Hi Don,
Just want to know why you wish your kids don't be a trader.Is something wrong in trader's life. I am thinking to be a trades so just want to hear other side of trader's life.
Good work, Don.I enjoyed your blog.


Don Miller said...

Hi DK -

Because as a parent it would be extremely hard for me to see them endure the required pain from time to time.


Get In Get Out said...


I live in Long Island about 1/2 hour from NYC. I was actually thinking about going to the traders expo since I am one year into the trading biz, but thought twice real hard after seeing the prices $500+ and up for keynote speakers on technical analysis, gap openings e.t.c. I felt that these speakers are most probably giving these speeches for huge sums of $$ due to their lack of success as a trader. Therefore I have decided not to go and save my $25 train fare into nyc. I also feel that paying $600+ to listen to a keynote speaker will not give me anymore insite in this biz as reading your blogs and the comments of others & the educated responses you give out for free. Thank You Don... Last I wanted to ask you what you personally think is the #1 and #2 reason on why most traders do not have what it takes to become a successful career trader? Tell me if I am right I would say #1 is Impulsive trades which is lack of patience #2 Emotional Trading.

George "Winace" Swanson said...


I currently trade about a 500K account, well combined between two accounts. I am going on about 5 months without a losing trade. I find myself working on return on capital utilized now that the "if" is not longer an issue, but "when". I, as you, scale into and out of every position unless I am correct from the "get go" (which almost NEVER happens of course). I am only "in" the market, at maximum thus this year, about 20%. I raise this amount to get a better bottom line return by hedging the trades and thus staggering exits upon volatility. I realize, on average, 7% return on capital actually "utilized"(not allocated) per trade. Since I do not personally know anyone with my success rate and trade style, I have nothing to measure against. On average, what would you say your return on utilized capital per trade is? For this is where I have re-focused much of my attention.

Don Miller said...


I'm not sure of the #1 reason, as since most fail, there's probably a long list of various causes.

Based on my own journey, I'd say the following likely rank pretty high:

- Ego
- Lack of accoutability
- Inability to repeatedly get back up immediately after a fall without going on tilt
- An inability to process several data streams simultaenously while acting without hesitation
- Lack of adquate capital and planning for initial and periodic drawdowns
- Failure to fully accept that every decision outcome is ultimately based on probability

Oh, and did I mention ego? :-).


George "Winace" Swanson said...

Thanks Don, confidence and conciete draw a fine line, I see how you interprete my question.

Don Miller said...

Hi Winace -

No clue. You of course touch on a variation of the return concept which I discussed a bit in the post, "My views on ROR" which is listed in the key post index to the left.

And although the post doesn't address your question specifically, it does reinforce the notion that I spend very little time analyzing or thinking about it.


George "Winace" Swanson said...

hey, quickly disregard my last comment, took the ego comment personally ;-)

Get In Get Out said...


You mention one of the reasons for failure is lack of adequate capital, obviously this means that there should be a certain ratio of contracts traded vs. capital margin available in one's account. For a newbie starting out obviously it makes sense to trade in a virtual platform, but after a few weeks of a virtual platform experience would you say less than $10K is automatically a set-up for failure even with a limitation of 1 lot traded? Also want to know if you still have a live audio feed during the day as I read in one of your articles dating back to 2002? & if not would you consider getting one going again considering the strong following you have with this blog? Thanx again for the response to my questions.

Get In Get Out said...


I think Winance is getting confused that you responded to my question right under his, so he probably thinks the response to his question is you responding to him instead it was to me. Anyways I wanted to know if you agree or disagree on what I stated before as I am trying to make the ultimate decision about going to the expo. I thought twice real hard after seeing the prices $500+ and up for keynote speakers on technical analysis, gap openings e.t.c. I felt that these speakers are most probably giving these speeches for huge sums of $$ due to their lack of success as a trader. I also feel that paying $600+ to listen to a keynote speaker will not give me anymore insite in this biz as reading your blogs and the comments of others & the educated responses you give out for free. Want to get your comments and testimonials to see your opinion and if you agree as well? I am not sure how to interpret your analogy when u say "I was risking becoming a pot to the black kettle, as well as converting my house walls into glass, while at the same time maintaining an arsenal of stones" I think that would mean you dont want to act as another one of those tricks and scams to sell a gimmick trading tool? Not trying to come across sarcastic or arrogant just trying to get a better idea what you mean.
Thanks again for your insite.

Don Miller said...


Yes, the order of the posts may have confused a bit.

It would be wrong for me to try to answer a ? about whether it's worth going to NY, and it would also be inapprorpiate for me to try to guess whether speakers are successful or not.

You may want to search past posts where we've had similar discussions on my views, which include my belief that there are some strong teachers out there, including some of whom may not currently trade.

Clarifying my comment about the line and analogies to the pot and glass stones, I've long been outspoken about certain "pockets" in this industry that are selling dreams, "depend on me forever" services, or horse race calls. And I just didn't want to risk becoming another "pocket" as it can be a very slippery ethical slope when one begins to sell more than trade.

There are a few people that are likely worth far more than the price of admission, while others may not be worth a nickel. Like college, there are good professors and suspect ones. My guess is the expo organizers do a pretty good job at sniffing out who's good and who's not.

Other than that, it's "Caveat emptor" or buyer beware.


E said...


my mantra when it comes to the market.

With all due respect to the no-lose traders, The Black Swan suggests that outliers do occur.

For those with capital but who weren't around august 17, 07, you may want to review the chart when the market gapped up limit and es opened 70 points higher.

Jerome Kerviel also comes to mind.

Not trying to rain on your parade, just consider it as friendy advice.


Anonymous said...


I respect your opinion but your comment on attendance this year is flat wrong. There are more traders registered for this year than last year's event.

Most traders come to simply talk with fellow traders and exchange ideas. The workshops are free - I'm a believer that finding one or two new ideas makes the trip worthwhile.

There may be some folks there selling the holy grail, but if you attended you'd find that over the last few years the Traders Expo has become a much more practical, realistic and subdued event.

Registerations are likely higher this year simply because people realize taking control of their portfolio and learning how to manage their own investments is critical at a time when index funds are down and individual stock-picking has gotten more attention.

Networking has always been the most popular reason for attending - that's never changed and will continue to be an important part of the Expo.

I no longer own the event - my motivation for commenting here has nothing to do with convincing you to attend. But I do find it disheartening to see people not attend simply because they've heard it's the land of false promises and snake oil. The hallway conversations I overhear as I walk around the show are always about traders talking with each other and helping each other make better decisions - plain and simple.

Tim Bourquin, Co-Founder
Traders Expo

Unknown said...

Hello Don,

Again, you nailed it on the reasons WHY its so hard and the one that rings true for me the most is " Inability to repeatedly get back up immediately..." I work on that when im in that situation!

I too greatly respect Howards views, but wondering what you think of this J.C Tran- Is the guy still in the mix?

Being said...

Hi Don,

Really great to read how you have taken the high road, which makes your blog even more valuable.

To me, "ego" means I've made some big money, start to feel invincible, and get sloppy about entering trades. I forget the trading screen is not an ATM. Is this how you're using the term?

Thanks for being here.

Don Miller said...

All -

Please note Tim Bourquin's response to my initial post, which has resulted in a correction to correctly state the facts.

He presents several strong points, and I hold his opinion in high regard.


Luke said...

Hi Don, I just had a look at average daily volume of cme emini-futures in january 2009 compared to january 2008. Volume is sharply down in ES, NQ and YM. NQ dropped from 552000 to 285000. I was wondering what your opinion is on this development, could we be seeing tough times for emini-daytraders in the near future?

George "Winace" Swanson said...

Don, and others,

First off, Don, please let me know if I cross any lines.

To help place some perspective on the educators of market trading, I can share some of my experiences.

I frequently commented and placed speculative calls on a pretty high traffic blog site regarding technical analysis. My earie accuracy (although, in hindsite, more luck) prompted the fellow readers to urge me in the direction of starting my own blog, for which I did. Keep in mind, I paper traded the markets for 5 years before EVER laying down one dime, I realized early the hurtles placed against the average trader. Throw in emotions, spreads, greeks, and the basic human responses and you are pretty much done for (please do not let this discourage you, for it can be done).

Upon starting my own blog on technical analysis and the application of channel use within the markets I came upon another one of my great epiphanies (you will realize many of these during your trading maturity). This information started me to study even deeper within the markets. I though there was no deeper to go, but man, I was incorrect!

My revalations put upon me a moral dilema. The use of technical analysis, alone, was very misleading. The things I was blogging began to take on a misleading tone. I was mislead from day one with market educational propoganda, and I found myself pretty ticked off about it. I read over 200 books, to find I wasted my time, because 99% of these were pure junk and designed to bring in "new" money to the markets.

So, where do I go from here? The things I was teaching, were now conciously misleading (before I did not realize I was doing my readers more harm than good). I was correct enough to allow them hope. The market mechanics I discovered were not anything I really wanted to teach, for this information, released on a mass scale (if possible, for no book would pass the publisher containing it) would actually work against itself. It would reduce volatility to the point where it would not be as profitable. The misleading educational material is designed to create volatility while bringing in new money.

So, I first attempted to "hint" to my readers. This was more confusing to them than me just leaving things lie and quiting the blogging all together.

Most peoplesearching out the "holy grail" of trading want things handed to them, a person to follow, a shepard to lead the sheep. There is a way to trade these markets coonsistantly profitable, but flat out teaching this methodology is profit capping, and potentially dangerous in many ways.

So, a few pointers from me, and keep in mind, it is only one mans opinion.

1. Do not believe everything you hear or see, this regards trading techniques, news, or anything that has any reference to the markets. This is smoke and mirrors.

2. No individual can say buy here, sell here accurately. Markets entries and exits are not static, these targets always move, and they need to be tracked.

3. Whether intentional, or not intentional, most educators regarding the markets are misleading. They contribute to the smoke and mirrors in one way or another.

4. Any individual that DOES know how to trade for profit 99% of the time, will appear very vague in the comments regarding your education, learn to read between the lines, they want to help, but not on a mass scale.

5. Draw-downs are a way of life. I consider draw-downs as losses NOT realized, once they are realized, they are then losses. Less than 2% of my trades do not experience draw-down of some magnitude or another. Those most adjusted to this realization use fear and greed against the masses, for we are on the other side of the trade which you are now excited about!

6. There is a great time commitment to learning how to trade, do not hurry, you will think you have the ideal trading technique many times along the way. I am an engineer, who commited 20 hour days, 6 days a week, for 5 years into studying the market. You may be able to do it more efficiently, but you will be discouraged a great many times. Hang in there, if you have the dedication that THIS is for you. Believe me, it is not for everyone.

Please keep these things in mind, for I have come to that "line" which I will not cross myself. There is a reason behind why technical analysis works sometimes, but not others, and reveals some "organization" to price movement. Some slight details are not found in any book, but require self discovery, or an individual trainer, who does not train the masses via seminars and/or published material.

George "Winace" Swanson said...

One more pointer to add, although, this one may be slightly discouraging. It is a way of the system, I did not design it, but it is a fact nonetheless.

It regards under-capitalization. This is the primary hurtle placed against the average Joe. Without adequate capitalization, your probabilities of getting your proverbial "clock cleaned" are very high. Believe me, this is a big hurtle, for after realizing this, I had no capital to trade (never did have any). I am the average Joe, who worked paycheck to paycheck, robbing Peter to pay Paul. I actually had to prove myself to others, then trade their capital. So some advice, if you really want to make a go at this, raise capital. Vow to not put it into the market until you are certain you can come out un-harmed. DO NOT lie to yourself, for you will, I know it! Dig deeper, it's in there!

Don Miller said...

Hi Luke -

Not too sure what the lower volume means, although it's not a surprise after last year's emotional tsunami.

Nevertheless, it may be good reinforcement that this business is about continually adapting to current conditions, and that trade sizing adjustments may need to occur amidst lower volume to keep pace.

And for those who are geared to thrive primarily on volume and volatility, it could mean an interim ebb in expected bottom line and reversion to the income mean to offset last year's bounty.