Wednesday PM Notes - Grinding It Out

Here's a quick late night video follow-up to today's earlier post discussing my strong views of needing to "grind out" trading profits (as opposed to your teeth) to use as the only source to replenish trading losses.

It's been one of the parmount reasons I've been able to stay in the game and prevent any hint of a death spiral which has sabotaged so many traders.

As for the short-term trade-off in terms of immediate profits as the result of reduced size?

Well, I'll take "Trading for the Long Term" for $1,000 Alex.

At this end, history has shown that such a choice always results in the Daily Double.

Wednesday Notes - A Crowning Achievement

First, please forgive me for the post title pun, as I've closed up trading shop early on this textbook MATD to spend 90 joyous (not) minutes in the dentist chair so one of my chipped molars can get prepped for a gold crown. 

Don't you love how dentists call grinding a tooth down to its stub "prepped"? I call it torture.

Yet in a way, perhaps the title is fitting in that I've continued to catch a bit of a tailwind with my trading as the summer rhythms have been rather kind in terms of opportunity ... leaving our job to simply not throwing up all over ourselves in the process (great visual, huh?)

And while this month was far from my best in terms of profitability as I purposely cut my sizes back, I'll argue that it may have been one of the satisfying "grinding" months ever given that it was -- by far -- one of the most critical months of my career.

This is because for the first time in my "post-figured-this business-out" career, I was doubting whether I still had the (A) tenacity and (B) desire to not only fully recover from the events of May 6 hit and get my capital back above my critical career trailing stop (as I said recently, below which it had never dropped), but to re-establish the necessary blend of consistency and confidence -- the former breeding the latter -- to plant the seeds for recapturing what I'll call a championship caliber performance level ... and on a sustained basis.

Simply put, I can't overestimate the importance of this month at this end.

So I tweaked a few things:

- Reduced sizes (at the same time proving you can run a nice store with modest sizes).
- Reduced # of trade sequences (to levels where my broker was wondering where I was).
- Barely traded the Europe markets (although I of course traded ES during those times).
- Made consistency my highest short-term priority (thus the temporary blog counters).
- Often narrated non-stop in the Jellie room while trading so I wouldn't lose focus.
- Ramped up supplement program (to help this 49-year old brain feel like 25).

The net result is that which you see in the top left corner counter, and a month that ended with a strong 30-to-1 ES win/draw dollar ratio.  Yea, I know, shades of the multi-month ratios in the '04, '07, '08, and '09 zones.

btw, note I added a counter for # of days since  > 0.5% loss, which is far more meaningful than the more silly "no loss" streak which will come and go ... and should "go" from time to time else I be trading on eggshells and not focused on net profit over time.

Perhaps the following exchange of brief emails between Pat Lafferty -- my broker at MF Global since '03 --and me from today sums everything up best.

Don: FYI, look for my volume to start picking up again after the 4th. I've been in conservative mode lately to work my ass off and get back above the pre-flash crash level ... which is now done.

Pat: I saw. That’s good news. I never doubted.

Truth be known, for a brief moment, I doubted.

Not the skill or methods --- those will always be there long after I'm gone -- but the desire.

Oh Ye of little faith.

And the journey continues ...

Tuesday AM Notes - Maybe It's My Fault

Here are two outstanding motivational videos as provided by onlookers:

In the first one, Michael Jordan summarizes EXACTLY what I've been trying to say to the trading community for more than a decade, and especially during the last two years of blogging.  This would be such a great final post ... so very, very tempting :-).

Please listen to -- and digest -- every single word ... especially the part about failure & pain.



This second one (about 10 minutes long) discusses what truly motivates us, using an MIT study as its basis:

Monday Notes - Synchronized Swimming

OK, let's recap this morning's PJO (Prime Jellie Opportunity) ... once again using the Jellie tank transcript (click to enlarge).  This time, I left the Jellie comments in tact (hiding the names for confidentiality) to reinforce the benefit of multiple "team" eyes.

Sharp focus, a single market (do people still trade multiple markets????), one setup, stalking one sniper shot, multiple eyes, & everyone swimming together.

As it should be.

P.S. I may do this from time to time as time and focus permit ... and will be sure to include losers as well.

The Weekend Trader Part 3 - The Consistency Counter

I thought I'd put the upper left hand blog counter in perspective as to its intent, objective, risks, etc.

As I mention in the video, I'm considering it a summer game of sorts to help maintain current momentum and keep sloppiness from creeping in.

Further, here are some tips on keeping current personal momentum going:

Try to identify what you're doing right. 
After all, something is clearly working & you'll need to duplicate it.

Don't listen to anyone else or let them get you off your game.
Keep in mind most traders lose and misery loves company. Make them do it solo, and remember that they're the speculator and you're the casino.

View the "pre-momentum period" as if it never happened.
You think Kobe or Tiger ever believed they missed a shot when taking the next one?

The Weekend Trader Part 2 - Viewer's Choices

As this journal reaches its second birthday, and both traffic (+20% in last month per Alexa.com) and twitter (twitter.com/millerdon followers at 600+) are once again spiking, I thought it would be helpful to provide a snapshot of the top onlooker visited posts as ranked by Google Analytics (which excludes my personal visits).

All-Time:

#1 - Cornerstone - The 7/4/08  "fictitious drawdown" light bulb post that was one of the main reasons I launched the blog, and which became a central theme of my trading during the record 08-09 runs.  By far, this is the most often referenced link, outpacing #2 by about 4-1.

#2 - Chinese Bamboo Tree - One of the most powerful concepts I've been exposed to in my 49 years, which has had a profound impact on me in recent years.  It's also incredibly listed #5 in the world if you Google "Chinese Bamboo Tree".

#3 - A Night to Dance - The 2008 Year-End post which was always designed more to motivate others than tout my personal victory.  And yes, I visit it on occasion when I need that confidence boost.

#4 - CME Pricing Thoughts - An analysis restating 2008 results for non-CME member rates.  See below for a better and more up-to-date analysis.

#5 - 2008 Statistics - A rare in-depth look into a professional trader's detailed trading stats for a full year.  Likely the only time you'll see such a public analysis due to confidentiality and industry mis-use.

Top 2010 (If Not Included Above):

#1 - MoneyShow Interviews - Links for the four MoneyShow.com interviews I gave just before speaking at this year's NY Trader Expo.

#2 - E-Mini Commission Analysis - An in-depth analysis I did to compare various trader commission alternatives verified by MF Global and the CME.  To my knowledge, the only place you'll find such an analysis on the web, so take advantage of my legwork to avoid having to do your own.

#3 - Replay of 2010 NY Expo Presentation - A Livestream replay of pertinent portions of the Feb 2010 presentation to a packed house in NY.

#4 - There's No Crying in Trading - Personal perspectives and bruises immediately after the 5/6 flash crash.  Also the #1 ranked video and most accessed day of the year.

#5 - Keys to the Castle - Critical lessons from the inaugural Jellie team participants.  A must-read due to (1) my personal conviction, and (2) as stated by the flood of emails I received.

And a reminder that a list of key posts which I believe should be of particular note for all traders can be found in the lower left-hand margin.

If you're new to this site, welcome.

If you've been with us since we started, remember that repetition can be a good thing.

Enjoy the rest of your weekend.

The Weekend Trader Part 1 - Time to Sling It

It was February 3, 2002.

There was 1:21 left on the clock, the game was tied, the underdog team with the rookie quarterback named "Brady" had the ball on their own 17 year line, and the NFL championship was on the line.

Everyone expected Brady to play conservatively and not make a costly error deep in his territory so they could take their chances in overtime. 

Even "expert" commentator John Madden told the viewing millions that he should simply play it safe and run out the clock.

We all know the how the story ended, as Tom Brady quarterbacked one of the greatest Super Bowl drives ever to win Super Bowl XXXVI.

What some may not know, is the advice that Drew Bledsoe (for whom Tom had taken over during the season after a devastating injury) gave Tom on the sidelines just before beginning that drive.

He told Tom to "go out there and sling it".

Now while there are conflicting versions of the story -- including a more "colorful" version in terms of vocabulary and another one that suggested Drew was just kidding -- there can be no doubt that Drew was telling Tom to simply stay loose and execute.

Fast forward to June 26, 2010, and I need to heed the same advice.

For as I get ready to close Q2 and wipe the slate clean once again, the record shows that the last two quarters have been one of my more "interesting" stretches in terms of trying to effectively balance capital conservation and growth.  It's a challenge that for obvious reasons comes later in one's trading career for those that have figured out this game.

For there are many phases in one's trading career, beginning with the huge learning curve and capital draining period that all must go through, yet few get past.  Then, for the minority who do indeed weather the initial storm, one enters the fairly consistent phase where it's all about capital growth ... which at times will be rampant.

And then there's the later stage, where capital preservation becomes as important, if not more so, than growth.  We'll call that the "Don" phase.

It's a phase that has done in many successful traders, including -- as I mentioned the other day -- possibly even Jesse Livermore, who was rumored to have lost it all after having been the focal point for what is considered one of the greatest trading books ever published, "Reminiscences of a Stock Operator". 

btw, I completely disagree on his comment about not focusing on the small gains, yet this was printed well before market liquidity and full electronic access was as it is today ... but that's a topic for another time.

Those who have followed my journey well before this blog was introduced -- going back to the late 1990s -- can likely see such progression in my writings over the years as I first spoke out very publicly about the huge initial learning and capital draining periods that I'd experienced (in part to again try to offset the ridiculous hype and scams prevalent at that time), to focusing on the simple methods that allow for capital growth (TradingMarkets days) that I still use to this day, to periods of personal parabolic equity growth, to the current phase of needing to balance preservation and growth.

And while I recognize many onlookers -- perhaps the majority of them -- are working through one of the first two phases, well ... I'm simply at where I'm at.

They say you learn something every year in this business, and this year has taught me that while you'll face "different" challenges later in your trading career, they're every bit as challenging as those which you first encountered in those early days of frustration and sleepless nights.

Now I recognize that balancing growth with capital preservation is an issue at every stage in one's trading career.  It's just that their weightings shift as you age and plan for retirement ... just as they would with any effective portfolio management strategy as one ages.

And I've found that effectively balancing the two has been one of my toughest challenges ever.

For what began as the self-described "Year of the Iceberg" became at times "Year of the Ice Cube" as I too often alternated using the accelerator and brake as I tried to find the right mix.

Our former NFL quaterback Jellie (still with us btw and showing some solid consistency) refers to it as playing "not to get injured" ... which as he states, is simply the best way to get injured.

Yet too many times, I found myself overusing the brakes.  In fact, if you were "driving" behind me in a virtual sense this year, you'd likely have seen my tail lights on ... even while I was driving 60 mph.

Yet just as the end of Q2 for me was about establishing and reinforcing consistency, confidence, and capital after the flash crash (check, check, and check), my goal for Q3 will be to loosen things up a bit.

For after yet another helluva personal comeback, the score is once again tied and the game is on the line.

It's time to stop playing for overtime and go for the win.

It's time to sling it.

Thursday Notes - Act Like You've Been There

In today's video, I remind all of us that long stretches of consisently positive results as I'm currently experiencing should be considered the norm ... and not the unexpected. It's simply our job, and after years in this business, we should be able to distinguish wholesale vs. retail every day.

As for those in this industry who try to glorify this business via high fives when a successful trade occurs, they're simply rah-rah casino dealers continuing to mislead those pursuing this business as a serious, well "business". 

Want excitement, disappointment, and entertainment?  Go to Vegas.  And don't forget to add budgeted gambling losses when you estimate travel and food.

Want to run a highly profitable business?

Work your a$$ off hour by hour, day by day, and year by year, don't go for home runs, and expect consistent success to be the norm.

After all, you own the dang casino.

Wednesday Notes - MATD Open

While we wait for FOMC action this afternoon, here's a glimpse of this morning's MATD trade as narrated live inside the tank. Click to view; Note I've excluded comments from the Jellies for privacy purposes, and the Globex session short bias played out prior to the U.S. regular session open. 

Some of the shorthand can be found in last year's Jellie acronymn dictionary post.

Note "TMAR" isn't listed and means "Take the money and run", "TD" means "Tick Divergence", "LOD" means "Low of Day" (after the blood has been spilled), and "TUB" means "Trust Until Broken".  And if you've been in a cave for the last few years, "MATD" stands for the "Morning after a Trend Day", which provides one of the most consistent sources of revenue for this trader.

As always, my preference is to be flat during any scheduled news announcement, which in this case was sandwiched around the two highlighted sequences.

A full description of all MATD strategies can be found in the Jellie Webinars.

Mon & Tues Notes - High Tide

I dread these sorts of posts.

For when my trading is going well, my preference is usually to simply remain silent.

Yet since this journal remains to a large extent ... well, my journal, I suppose I need to make some mention of my personal trading as of late.

First, I'll start with the negative.  I've left a lot of money on the table in recent weeks -- which should keep my humility in check -- as the result of playing a great deal of defense.   And anyone following sports knows when you play defense, the scores tend to be lower.

Yet the reward of playing strong defense is that I haven't been "scored upon" for a while.  A long while.  Over 20 days of "while".

And as much as I dread typing these words (call it superstitious or simply not wanting to upset current personal rhythms), I haven't had a loss in over 20 days.

OK, I said it ... so let's focus on the lessons.

For I fully admit that these six weeks have been tough for me from a trading perspective ... and for a number of reasons.

First, the May 6 flash crash hit took me below a trailing equity "reassessment" stop that I'd had in place for a long while.  Frankly, it was the first time I'd dropped below an increasing trailing account stop in years.

Now one could argue the stop was too tight -- which may be true, although the older I get and the less need I have to risk capital, the tighter it will probably get.  Keep in mind at this point in my life, I don't "need" to trade, unless my life expectancy suddenly increases to 120 or so.

Yet the reason I call it a "reassessment" stop -- which the Jellies know should define EVERY trading sequence stop one has in the market -- is that it would trigger a reassessment to avoid an Archie Karras (real) or Jesse Livermore (rumored) type of major long term capital meltdown.

And frankly, for me to fall $60K off my equity highs -- even for the seven figure account size I have -- would be of tremendous significance for this trader given my extremely consistent record over the years.  Essentially, it would signal that something is "wrong".

We of course know that the only thing "wrong" was a 20 minute once-in-a-lifetime market liquidity failure where minutes literally separated a +$60K day from a -$60K day, yet rules are rules, and so it still required that I step back to reassess in a way that I've never really had to do.

And so I kept walking hour by hour, day by day ... yet clearly at less than 100% mental and confidence levels.

My goal during this time?  Simply to build back the confidence by establishing rock-solid consistency over a period of time.

Another reason the last six weeks have been a challenge is given the number of personal events in my life -- most notably the recent graduation and celebratory events, which while being wonderful for many reasons, have adversely affected my focus at times.

Yet speaking of focus, I've discovered some tangible benefits to beginning an Omega-3 and Omega-6 program lately, which has resulted in better sleep, more vivid dreams, and greater sustained trading focus over the course of the day.  So I suppose I should give some credit for the last few weeks to the folks from Nature's Bounty.

Yet here we are on this third day of summer and all seems as it should be.

The tourists and resulting traffic are arriving on the Cape right on queue, the weather is warming, and the trades are flowing alongside the tide.

And while I know the tide will shift over time, I'm going to try my darndest to stay on the board and ride this developing wave as long as possible.

The Weekend Trader - Raising the Sails

On the heels of Wednesday's "Getting Restless" post, and as I approach several mile markers over the coming weeks and look to the next phase of my trading & life -- and at the risk of sounding a bit like "always but never retiring" Brett Favre -- I can't help but again wonder if this public trading journal has run its course.

Such a question also comes at a time where I wonder where my true focus should lie as I get ready to enter a new phase in my life.

Whether you call it a mid-life reassessment (I refuse to use the word "crisis", as it clearly isn't) or some other term, the fact is that I'm about to reach several mile markers which are getting closer to the end of the road than the beginning.

I had a similar feeling about a year ago.  Instead of duplicating the content here, I'll simply direct you to last summer's post of similar reassessment as focus shifted for a brief period from self to group.

I've always told myself that I'd keep blogging as long as I felt it was helpful.  And as I look back at two years of writing, I feel I've fully accomplished my initial goal of open and candidly sharing the ongoing challenges, successes, and stumbles of a bona-fide trader in this performance-driven field.  For such was always my goal, from that day when I ended my self-imposed exile from public view to this very moment.

It's all here, with many of the highlights listed in the Key Post list in the lower left hand margin.

And I mean all, with specific and purposeful emphasis on the occasional pain, disappointment, frustration, burn-out, and momentary (but long forgotten) October '08 and May '10 daggers to at least try to offset the forever-rampant industry hype.

Yet most of all, this blog was intended to be a documentation of the human spirit.  A formal record showing how, with the grace and strength from God and support of others, we can strive to overcome life's imperfections.

How else can we explain one trader coming off the mat again and again and again -- and again -- to overcome his humanity and achieve what some might consider the improbable on a sustained basis?

How else can we explain Chelsea's incredible story of managing a daily life-threatening situation to overcome the odds and accomplish more in 18 years than many do in 90.

And as I approach various markers over the coming days -- including the 2 Year anniversary of the blog, 1 Year anniversary of the Boston Bamboo Trader's Picnic, 1 Year anniversary of the Jellie launch, Chelsea's graduation party & 18th birthday (both yesterday), and beginning of our empty nest years -- I'm convinced more than ever that in our case, part of our mission is to inspire others to never give up on life.

Not only not giving up on life, but living it abundantly and to our fullest potential.

For as in this video which I first posted last July, life at times is going to do its best to shake us to our very core.  The winds and rains will come -- hard -- and try to drown our strength and motivation.  Some will even revel in seeing us flounder.

Yet as Truman did, perhaps it's simply our job to hold onto that rope and raise the sails so God's wind can direct us to that open door.  And we all have the rope burns to prove it.

So long this remains our mission and there's more to share, the virtual blog pen will remain in hand.

And if life's sails direct us otherwise?  We'll try our best to go where the wind carries us.

Happy Father's Day.

Friday Notes - Pursuit of Excellence

6:54PM Update - Duhhh ... I forgot to wish all the Dads out there a Happy Father's Day!!  Plus, a reminder to check out Thursday's post, which was posted late into the night.

While I promise this will be among the last posts on recent graduation events at this end, I can't help but AGAIN see trading parallels in the attached video clip of the Dennis-Yarmouth senior student gathering (held the day before the official graduation ceremony).

And when I see life's trading parallels, regardless of "who" it's about, I post away.

Now for a moment, I ask that you view the attached completely forgetting the "who", and instead focus on the "what" ... which is the only reason I'm posting this in a trading journal.

Trading lessons?  Listen to principal Ken Jenks as he describes (1) what it took for the top two students to accomplish what they did (hint: count how many times he references "hard work"!), and (2) how the top five students all remained extremely close as friends as their "competitive friendship" and healthy "peer pressure" inspired and pushed each other to attain their own personal best. 

Jellies, please pay attention to that last comment!

And so it is with this intensely performance-driven & zero-sum business called trading.

As Ken said, "Excellence is not about natural talent ... that gives you an edge.  But in the end, excellence is ALWAYS about hard word.  It's a simple formula, yet it's incredibly difficult to put into action.  Excellence is no accident ... it's not a lucky occurrence."

Hard work and pushing each other to attain our personal best.

Words we should all live by.

Including this trader and author.

Note that the video was recorded via aiming the camera at the TV as it was played locally, so the quality isn't as great as normal ... but the substance remains.

Thursday Notes - EMail Bag

A few things late on a Thursday night.

E-Mails - Most of the best "conversations" I have with traders come via phone, as well as the dozens of emails I receive weekly.  So from time to time, I'll try to post a few emails and responses of some of the more pertinent ones ... while keeping the names private for obvious confidential reasons.

Question - I'm reading your blog every day, it's a great source of motivation and inspiration.  There's a question I have regarding, as you said, "at the end to not overcomplicate this business".  I came across a "professional" trader (he has been working on several trading desks in prop trading with various institutions), who basically says, that you need to learn and understand market profile, volume delta and order flow to be successful in trading the eminis ... otherwise you are at a serious disadvantage against all the pro traders out there.  I would be very glad to hear your opinion on this.  P.J.

Response - While I respect other traders' opinions, that's totally hogwash. I've never used it, never needed it, and have no desire to change. Don

Follow-Up - As I've often said, there are many ways to essentially "see" the same info.  I simply choose ... well, simplicity, and Market Profile -- while used effectively by many traders -- easily falls into the "TMI" category at this end.  If your trading isn't going well, it most likely isn't the tool or instrument.  A violin is a violin ... some simply play it better than others.

 

Suggestion in response to Wednesday's "Getting Restless" post - (Excerpt from longer email) - First though I feel a reticence because already your blog is the most open and insightful account of the business out there and you do it all for free. So really how can I shame facedly ask for more? Anyway, I have gotten over the past 1500 hrs screen time that there are lots of different ways to trade profitably, and that it takes time to discover what suits ones personality best. For me, this is part of the ongoing learning curve which I recognize has to be managed well or the tools of the trade, the capital, will disappear.

To be able to sit in a trading room for a couple of hours with yourself; see how you composed yourself,, what you looked at and thought, how you managed trades, what you did in the gaps to stay focused, all that sort of stuff. Not to call out trades, or tell traders what to do, or even answer questions, since I expect this would probably cause legal issues and affect your personal trading. Next to making one’s own mistakes and bit by bit learning to stop repeating them (!), that’s how I certainly would benefit. Payment by subscription to “the room” weekly or monthly would be one way to do it, since I’m not really sure what benefit you would get otherwise. A.R.

 

Response - Thanks. What you describe is essentially the live multi-week Jellie effort, which I'll do again in the fall.

 

Follow-Up - First, as I mentioned above, there are many ways to trade. Remember, Rick Barry shot free throws underhanded!  'Nuff said.  Second, with respect to an ongoing room, I still at this time have no interest in a recurring pay chatroom, which is a completely different business plan intended to generate ongoing non-trading revenues for the owners. Not that there's anything wrong with them per se, (yes, there are a few decent ones out there amidst the industry rubble), it's just a very different business plan.  A further complication is that since I believe in teaching self-sufficiency, doing so sort of flies in the face of such an objective.

btw, if you're at all interested in the fall effort, please let me know now via email, as seats will again be limited and I plan on continuing them from time to time only if there's sufficient interest.

Feedback to Tuesday's "Beach Tour" Video (Excerpt) -  Anyway, the bottom line is I felt that your video tonight was one of the most inspirational pieces you’ve ever done. I am sure the background setting of the beaches of Cape Cod were a contributing factor, but you also quietly hit on some key points about trading, goals, life, etc… that really hit home with me. You’ve often said ‘trading is a lonely business’ and when you trade from the cave at home, there are plenty of times when you can easily lose site of the big picture quest that you’ve undertaken. Really – I’ve seen darn near everything you’ve ever put out. And it’s all damn good. But tonight's video, for me, takes the top position.  I plan on watching it a few dozen times, so it sinks in more. And on Wednesday, when I get done trading, I am going to my beach – also about 2 miles away – called the Pacific Ocean. Thanks for the great idea. C.K.

 

Just one of the many surprising (to me) responses to what I thought was simply a "change of pace" post.

Defense Wins Championships - And congrats to the Lakers, who learned this year that it's defense that wins championships against quality teams.  In a game with hundreds of plays and a series with thousands, just two stops would have given the Celtics the championship.  So true it is with trading as well, as for every mega-loss you avoid, that's one less comeback that you'll need to pursue, which can be so energy -- and capital -- draining.

Roosevelt Quote - Lastly, note the new Teddy Roosevelt quote recently added in the upper left hand margin:

Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure ... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.

Words of wisdom in this business for sure.

Wednesday Notes - Getting Restless

Yes, it's that time again as I resurrect the possibility of trading and tracking a modest account in addition to my hedge-fund sized main account.

Plus, a reminder at the end to not overcomplicate this business as we revisit the NY Expo "crayon" slide in terms of discussing today's successful MATD.

Tuesday Notes - Peparing for MATD

"Preparing" for tomorrow's MATD and some reinforcing thoughts on traders "earning" their freedom ... which is no day at the beach despite the quick tour of my favorite unwinding spot.

Monday Notes - Blog Break

Posts will resume on Tuesday.

The Saturday Night Trader - Midnight Reflections of Hope

On a day of celebration for many of us, my mind couldn't help but drift to those "on the verge" of success.  As such, I look to today's commencement words -- along with the story of the Detroit Pistons in the late 80s -- to try to provide a beacon of hope.

The Weekend Trader - Celebrations

Trading posts will resume on Monday with some innovative developments at this end.

In the meantime, congratulations to Chelsea and to all of the 2010 high school and college graduates across the globe.

Let the parties begin!

Friday Notes - Stop the Point-Based Stops!

Here are today's thoughts in response to several emails from frustrated traders re: point-based stops, as well as some NBA Finals trading parallels.

Special Post - It's Your Time

Dear Chelsea -

It's your time.

It seems like just yesterday when you looked up at me with those one year old eyes that seemed to beam, "Trust your dream".

Tonight is your night.

Fast forward eight years, and it again seems like just yesterday when you were fighting for life's vitality, a victim of life's unfortunate circumstances over which you had no control.  It was a day I'll never forget as we rushed a frail 55 pound young girl to Children's Hospital to face the beginning of a lifelong road of shots, tubes, and meters.

I remember several things about that trip.

I remember sleeping in the hospital playroom for the week when the beds were full. 

I remember being promised that I'd be able to first practice giving insulin shots on oranges, before the nurse turned to me on the first night when it was time for your shot and said, "here, why don't you do this." 

At which point, I recall screaming, "Wait, where are the oranges??"  Yet the nurse reminded me why I hate trading simulators as she said, "Look, you're going to have to do this eventually, so now's a good time to start."

Tonight ends an intense four year road of personal sacrifice.

And I also remember the doctor staring you in the face on day one and saying there was nothing that diabetes would prevent you from doing.  Nothing.

There's only one problem with this summary of history ... the word "victim" has never been a part of your vocabulary.  It wasn't then and it isn't now, for you've instead chosen to pursue a life of quiet leadership by example.

As parents, we're supposed to teach our children, be stronger than them, and help point their way during our brief period of stewardship.

Yet you've reversed the order on all three counts.

I wince when I get a splinter.  You've been stuck with needles over 20,000 times and have never complained.

Valedictorian.  Top Gun.  Top Dog.  Numero Uno.  An astounding four-year 4.24 GPA due to the weighting of AP courses & wire-to-wire #1 ranking for SEVEN straight years.

Life often isn't fair.

But tonight, it is.

And while I've said this before, I'll say it again ... you'd make one helluva trader.

Congratulations.

Wednesday PM Notes - Liar Liar

This post and attached pic (click to enlarge) will hopefully be ridiculously obvious and/or redundant for anyone who has traded futures or equities -- or tiddly winks for that matter -- yet I couldn't pass up the opportunity to capture a shot of the ES DOM as a few traders were up to their usual games by flashing sizes on the bid as they were trying like hell to get short on the offer during the bull trap that was in the process of triggering.

At the time, I mentioned in the tank that I didn't believe any of them, and actually added to my short by hitting them ... just as I used to do with the ARCA and ISLD ECNs in the days when I traded CIEN, BRCM, and all of the other 1990s stock flavors of the day where traders were trying to get an edge via bluffing via the ECNs.

And while I missed snapping the pic when the inside bid was flashing 3000-4000 contracts (um, I was trading at the time ... so this took a back seat), I did manage to quickly capture the essence of the "gamesmanship" (I'm being nice), just before the bottom fell out.

In the NHL, that trader would get two minutes for diving.

In the NBA, he'd be laughed off the court and lose future close calls as the result of such "flopping".

Yet my guess is the refs in the futures industry (no fouls) are even worse than those calling the NBA Finals (if you breathe on your defender, that's a foul).

At this end, it's one of the best confirming contrarian indicators in the biz ...

... while providing more than enough instant supply.

P.S. In this case, many of the bids did get absorbed, thus exacerbating the move.

Wednesday AM Notes - Two Lessons

Last night provided two lessons showing how trading yet again mirrors life.

First, the quote of last night's baccalaureate service goes to the graduating class marshall, who closed her speech with the following:

"None of us can go back and change our beginnings ...
  ... but we can all change how we end."

Sounds like a great opening page of a trading book.

Second, in the current NBA Finals, Ray Allen showed how important rhythm, confidence, and momentum are in terms of performance ... even for a world class athlete.

For after setting an NBA Finals record for shooting accuracy in Game 2, he went 0-13 in Game 3.

Isn't it so true with discretionary trading as well.

Guard your rhythm and confidence at all costs.

For it will help you pen that new ending.

Tuesday Notes - Graduation Week

Expect some brief posts this week as our family is quite busy with Chelsea's graduation activities.

Baccalaureate service is tonight, awards night Thursday, graduation on Saturday, and the party the following Saturday (we'll be rolling out the 2009 Boston Bamboo Trader Picnic tents).

With final grades posted, Chelsea was officially notified of her valedictorian ranking last night.

Sure, this is a trading blog.

Yet more than that, it's my life blog and this deserves far more celebration than any trading accomplishment by this author.

These two recent posts help explain why:

This Trader's Inspiration
Priceless

I'll of course squeeze in some trading material in-between the events, including my plans to begin recording my day's session with the HD camera for both self-evaluation and sharing purposes.

In the meantime, assume the silence indicates all is well.

And thanks to the overwhelming email response to The Weekend Trader post on John Wooden.

His life provided the material.

I simply typed the words.

Monday Notes - Blog Break

Posts will resume mid-week.

The Weekend Trader Part 2 - Lessons From John Wooden

His record as a coach was unmatched. 

His record as a human being may be as well.

- A 99 year life.
- An 88 game winning streak.
- 10 national championships in 12 years.
-  A 38 game NCAA Tournament winning streak
- The best coaching record in the history of basketball.
- A Christian and a gentleman who took the Midwest, one-room schoolhouse values to a west coast campus in disarray and moral decline in the 60's and changed its world.

With this weekend's passing of basketball coaching legend John Wooden, let's look back at some of his memorable quotes -- which aptly apply to the world of traders and their coaches -- with my thoughts in italics:

Be quick but don't hurry. Wholesale (a.k.a "profitable") trading is all about timing.  Wait for the wholesale price positioning and only then grab it quickly with both hands.

A coach is someone who can give correction without causing resentment.  I can do better here.

Adversity is the state in which man mostly easily becomes acquainted with himself, being especially free of admirers then.  Can you say October 6, 2008 or May 6, 2010?

Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.  Amen.

Do not let what you cannot do interfere with what you can do.  Suck at DAX trading?  Stick with ES!

Don't measure yourself by what you have accomplished, but by what you should have accomplished with your ability.  As I've said before, it's not greed ... it's maximizing talent.

If you're not making mistakes, then you're not doing anything.  I'll simply add that if you're not making mistakes, then you're six feet under.

It's what you learn after you know it all that counts.  Been there ... and frequent the neighborhood often.

Never mistake activity for achievement.  If you think you're a good hyperactive scalper, does your bottom line concur?

Success is never final, failure is never fatal. It's courage that counts. Again, been there and expect to visit often.

Winning takes talent, to repeat takes character.  Personal lesson learned in 2009.

You can't let praise or criticism get to you. It's a weakness to get caught up in either one.  Another personal lesson learned from years of public exposure.

Success is peace of mind which is a direct result of self-satisfaction in knowing you did your best to become the best you are capable of becoming.  Never let anyone else define your success or peace of mind.

And my personal favorite:

You cannot attain and maintain physical condition unless you are morally and mentally conditioned. And it is impossible to be in moral condition unless you are spiritually conditioned. I always told my players that our team condition depended on two factors -- how hard they worked on the floor during practice and how well they behaved between practices.  This last quote shows me just how much more work I have to do at this end -- on the trading floor and in life.

Please save a seat on the heavenly bench for the rest of us John, as we continue our practice in this pre-season called life.

The Weekend Trader Part 1 - Bigger vs. Better

Choices.

We all have 'em.

In life, it ranges from the "what do we wear and eat today" to the far more critical "what career and/or life partner do we choose?"

And in trading, it seems the choices are infinite in terms of what do we trade, when, what size, when do we exit, when do we rest ... and on and on it goes.

At my end, the choices recently have been mind-boggling, as I've learned that having an abundant amount of resources, performance longevity, and industry backing can result in a deluge of inquiry and opportunity on the business front.  More frequent Expo speaking, auditorium seminars, interviews, vendor partnering, blog Google advertising, reciprocal links, book writing ... the email box is full and they're all there for the taking.

In short, I could go big scale and follow the "American Idol" approach in terms of pursuing the almighty cash machine.

There's only one problem.

It's not me, and -- well, frankly -- I like where I am right now.

You see, I'm a trader.  A trader with a never-ending thirst for daily puzzle solving and personal performance improvement.  A trader with a side, yet equally passionate interest in teaching and associating with other traders via limited small group efforts and blog bantering.

And I thoroughly enjoy both.

So to all those who have recently asked for me to rethink/expand/grow/change my current modest little corner of the trading world, and while I appreciate the opportunities, I'm going to respectfully keep doing what I'm doing -- trading, blogging about corny movie analogies, motivational tools, and daily market battles, and instructing via limited small group efforts to try to maintain a certain degree of quality, freedom, and sanity at this end.

You see, at my end, life has taught me to do one thing well.  Two? Possible, yet the quality of each will likely drop.  More than two? Forget it.

My life experience has repeatedly told me that I'm at my highest degree of productivity and quality output when limiting activities.  Even in trading, my performance has always been best when I've limited my trading to a single market.  Know it, live it, breathe it ... and don't get distracted by anything else.  Boring?  Only if you consider making more bank deposits than withdrawals dull.

Said another way, Navy SEAL Richard Machowicz  -- who I referenced in the Memorial Day post -- says "Master your basic weapon.  Don't try to master all of them".  This guy knows ... he's had to stake his life on it.

I've often referenced the importance of simplicity in my life and trading.  And as outside "opportunities" have increased over recent years, I now know why some race horses wear blinders, lest their performance be hindered.

This fact has been reinforced by my continuing to benefit from and enjoy trading among my Jellie peers -- an association that in some cases is becoming life-long as some of us have chosen to extend our association with each other far beyond the confines of the initial multi-week effort.

And while trading ultimately remains an individual sport, the benefits of a small "Ryder Cup" type of team effort are becoming clearer over time.

A "team" in an individual sport?  Absolutely, with each representing a different body part or personality.  George has an eye for reading the VIX.  John G has an ear for even the subtlest of breakout heartbeats.  Danny created and pursues the IFT (inverse fade trade), which was a spin-off of our no-fade policy during a critical time of the day.  Cliff helps the scalpers see just a bit longer term to stretch their trades.  John B helps remind me of my personal favorite trade if I'm slightly distracted.

Of course, we all have to continually work on not letting chat get in the way of making or pressing our trades.  This is especially true for me.

Yes, I could go bigger.

There's only one problem.

I prefer continuing to work at getting better, both as an individual and a team.

Even if I have to wear blinders and miss the surrounding scenery.

Enjoy the weekend.