Saturday, May 30, 2009

The Weekend Trader - The Unwritten Chapter

If someone told me that I had to throw away all of my trading books except one, and that one would have to last me the rest of my life, it would be The Tao of Poker by Larry Phillips, which I've referenced many times over the last year.

Not a trading book you say? Then you've missed what trading is all about, for that $9.95 was the best money I've ever spent on any trading product, and has in return made me millions.

And so after not sleeping well last night after a pi$$ poor weekly performance, I rifled through the well-worn highlighted pages once again to try to reset my personal trading heartbeat, and am again leaning on the following realities:

Rule 180: Be prepared for long cold spells. Given the recent 17-month run, I'd almost forgotten it could occur.

Rule 182: Three or four times a year, you are going to have a poker session that is simply and utterly horrendous. Some years, you may have half a dozen of these sessions. Know ahead of time that they will occur, and try to get through them as cheaply as possible. Over the course of a career, I'll define "session" as a trading day, week, or even month, with May's tepid performance -- especially the last two weeks -- falling into that category.

Rule 187: Avoid taking yourself too seriously. I'll likely always have trouble with this one.

And most importantly (which I've referenced in the past) ...

Rule 222: It's possible to drift away from our roots ... after an initial burst of enthusiasm in the early days of your poker career - an intensity and excitement fueled by the newness of the activity - you reached another stage where you seemed to pull back a little and get too comfortable. The truth is, it takes a lot of energy to stay on the cutting edge of anything (not just to get there, but to stay there), and this is true whether we're talking about poker, athletic achievements, business, entertainment, art -- anything. It can be draining to be on top, so eventually we fall back a little. We're comfortable with letting somebody else take the lead for a while. It is sometimes helpful to "return to our roots" - in the sense of reaching back to this best sharpest self. We should try to resurrect once again that time where we were playing at our best. We need to get that edge back, not just lay back in a warm cocoon of complacency.

Yup ... Rule 222 is again screaming at me. And here's why.

While I've only been sharing the public diary for 11 months now, we need to go back to pre-blog days where I'd lost much of my motivation for trading at peak performance for a number of reasons that I've referenced in the past. Then I began the 2008 personal commitment challenge, created the fictitious draw concept, and then a few months later launched a public blow-by-blow diary which was a way for me to personally refresh the "intensity and excitement" that Mr. Phillips so keenly references above.

And it worked -- oh did it work! -- as the performance momentum began slowly but steadily before snowballing as fully chonicled day-by-day in this rare glimpse into a trader's real life. And since that decision was made some 17 months ago on December 31, 2007, the self-driven "intensity and excitement" has earned me $2,048,072 after expenses.

Yet as I mentioned in Thursday post and Friday's video, there now a huge "but" on the horizon (no jokes please as there's only one "t" in the "but" we're talking about here), as the intensity remains absent and waning, as evidenced by the poorest monthly showing in a loooong time. I'm not crisp or sharp, am simply spinning my earnings wheels, and have been sloppier, less focused and more easily distracted than I can remember in the last several years.

Like many, I need to be highly motivated to perform well. It's been that way since I was a child, and at the age of 48 isn't likely going to change. It's just who I am.

And so as I turn the next page on the monthly trading calendar, I need to either find a new spark, lower my goals to simply making an "average" keep (man, I hate that word), or perhaps come to the realization that the Big Bell Ringer in the sky has told me enough is enough, you've climbed your Mount Everest, the blog has served its purpose, and it's time to focus on other parts of life. Perhaps I'm being tested at a level I don't quite understand. (OK, drop the "perhaps".)

Frankly, I don't have an answer. However, while I search for it, I'm going to implement the protective earnings stop I referenced in yesterday's video. Not on total trading capital, but on the cumulative earnings figure from January '08 that I mentioned above. And that stop will be an even $2.0M. For as long as I stay above that water mark for the rest of the year, I will have averaged the $1.0M annual figure for two years which was my initial goal in the first place.

Giving up on making $1.0M this year? Not really. It's simply called protection to avoid an Archie Karas type road to ruin. btw, threre's always been very strong speculation that Edwin Lefevre of the classic "Reminiscences of a Stock Operator" also ultimately lost all that he had gained. And history has shown that the downward momentum spiral can be even swifter than the upside momentum.

As for the blog, I'll continue to think about its future continuation and public viewing. As I've said before, ironically, I tend to be an extremely private person. Most half-decent real traders are. And frankly, sharing every turn of my journey hasn't always been easy, as people can so easily misinterpret the thinking out loud, including the momentary year-end '08 celebration, this year's repeated references to trying to again find and sustain that motivational "spark", and everything in between.

One change I'm implementing immediately is I've ditched the experimental performance scorecard, which simply hasn't done the job for me this year.

To my onlooking friends, I wish I could "make up" a better current chapter of my trading career which would make for better reading. It's certainly more fun to read about the good times (unless you like NASCAR car crashes). Yet it is what it is, and both the current and future chapters of this unusual live non-fiction "book" are both unwritten and unknown by this author.

With apologies to Steve Carrell, if this "book" had a title, it would probably be "Don in Real Life". For you can rest assured that every letter, word, and sentence in these 375 "pages" has been the 100% God's honest truth.

I eagerly await a new chapter, as the last one has clearly run its course.

June 27 Cookout Reminder!


E said...

"Dance with the one who brung ya".

Focusing on the highest probability setups and not the money seems to help me get past plateaus in performance.

Never easy to unwind the negative thoughts and subsequent results once we plant those seeds, and we are all there much too often.

Momentum is a curious beast that has a life of its own, so difficult as it is to say this, I think you are wise to put in a stop loss to preserve the majority of your capital.

To your critics, I would say that US census data suggests an annual salary of $51,206 for college grads, and only $27,915 for high school grads.

If we assume an approximate annual salary of $50,000., you have earned 40 years worth of income in only two years.

Sometimes we need to step back a little to see how extra-ordinary our accomplishments are, and yours certainly qualifies for that in my book.

Stop beating yourself up and be proud to be the torch bearer for so many of us, whatever your decisions.

Charles said...

Great post D-man,

love it when you share and comment on excerpts from the poker book, especially since i haven't gotten myself a copy yet.

Just to switch the subject a little...i was wondering if anyone here cares to speculate (collectively our favorite activity, yes?) on what the heck happened at friday's close. I was trading off 4-min bars at the time and my 4:02-4:06PM bar shows over 304,000 contracts traded as ES spiked almost 15 points.

Though i've only been in ES a few months now(switching from equities) ,i won't even bother asking if this is unusual, but i am wondering how often DO you see something this crazy goin' on?

great weekend all, i have a feelin' next week is gonna be more wild than mild,


Unknown said...


Thanks for all you do--whether or not you continue the blog, your "experiment" has been helpful to me, and I know many others too.

May I ask one question?: You mentioned several times in your blog that it took you ten years of trading (and lots of pain along the way) to get where you are now. How long did it take you to become a break even trader? How long after that to become truly proficient?

The answer, I think, would help me with patience in where I presently am. I have been trading futures for two years, and am very much an "apprentice" still.

Have a great weekend.

Mike P.

Don Miller said...

Mike -

It's been a fairly constant evolution, and while I was fortunate to become fairly proficient early on, I had several starts and stops through the early years and as I moved from stocks to ETFs to futures.

If it helps, I've been a trading futures for about six years now, having joined the Merc in Feb '04.

Yes, it took me ten years to get to where I am today, just as it will take me twenty to get to where I am when I'm 58 :-).

And I still of course have my setbacks and frankly feel like a bit of an apprentice at the moment until I can regain my stroke.


Max Ghello said...

Hi Don,

I will miss the scorecard!
especially the number of contracts per day

Excellent Question Mike. It is a very interesting point ... your initial experience in trading Don. good and bad moments. are the kinds of things that would be a privilege for me to hear from someone like you.

perhaps in a post? a book? one of these days?

I hope so!

thanks & greetings from the "south" of the world!


Swing Trader said...


It's been inspiring reading your blog every day, even on the down days and days when you're searching for something better. Don't we all? That's real life, but still inspiring nevertheless.

You don't need me to tell you as you've said it yourself, but your number 1 focus should always be about your own equity curve, not the readers of this blog. Do what you need to do to reach your own goals.


Unknown said...


I found your blog from that list someone put out a week or two ago (from Maoxian's who I've been following for a month or two.

In 2008, I made 200k from trading with mostly swing trading, countering losses from existing longs. I essentially kept my equity (under a million) from its highs in 2007 plus a little.

Prior to '08, I was just a buy and hold (and lose) guy. But I believe '08 was once off year and am dedicating some time to learn the fundamentals of trading by following a few blogs, such as Trader Mike and Maoxian, and am reading the Tharp/June book, Financial Freedom through EDT.

I just got laid off my IT job. Even though I've had some interview activity, I think about getting off that track and trying the trading profession full-time. I've got some money to set aside for trading capital and can leave aside enough on the personal side to last at least a year.

But ultimately, I don't have the risk tolerance to do that. Anyway, your blog is great. You really open yourself up to your readers in a very unselfish way.

I understand your competitiveness and admire your willingness to question your methodology from time to time, but can't understand questioning your dedication or even competency.

I read one trader write that there are only a few periods in a year where you make good money. I guess that assumes that you have a dedicated methodology that you may be willing to tweak, but not abandon to chase the crowd, or something. Also, that you adhere to proper risk management. Buy what do I know?

I never feel more incompetent than when I read from you and others on trading, buy am fascinated to keep learning. Good luck in the near future and beyond, and I look forward to reading your posts.


Don Miller said...

Hi Ron -

Sorry to hear about your job ... best of luck to you.

With respect to your comment about making money only certain times of the year, I think a good intraday trader that joins the tiny minority of the population that consistently succeeds should be able to make money on the majority of days, and certainly every month ... albeit with some months returning more than others based on a number of factors.

As for me questioning my own competency, I'm just working through a frustrating phase in my personal trading at the moment, compounded by some life events. It happends to all, although it's certainly been a long while for me and this has been a weekend of significant soul searching at this end.


Teo Jun Hao said...

your equity comeback chart is amazing. i have been using it for a few weeks.
everyday i come online to your blog just to look at it for awhile and psych myself up. Like you, when making comebacks and recoveries, im in my stronger and more motivated state.
"im going to make a comeback every moment, every day, every week, every month" That's my mantra lol.