The thrill of victory and agony of defeat? OK, a poor attempt at humor given the market's recent craziness.
I'm actually referring to a new feature in the left hand column of the blog that plots where the last 100 recent visitors are from (no names and just a general location so privacy isn't an issue). What I found interesting was that according to the traffic log, parts of this journey have now been read in 61 countries. Hmm ... maybe I should be selling something (kiddddddding!). I wonder how they say "U.S. Market Crash" in Slovakia?
I'd also like to say a quick hello to Larry Connors, who co-authored the popular "Street Smarts" with Linda Raschke, and whose company co-produced various instructional videos and simulations with me a few years ago while giving me a daily online platform to vent my thoughts in the days before blogs were popular. Like me, Larry is a fervant Red Sox fan, and it seemed we were emailing each other daily in 2004 when the Sox finally broke the curse (yes Larry, it really did happen). I even remember FedEx'ing all of the Boston papers to him on the morning after.
Larry has put together great stuff over the years, and if you're into using statistics as an edge to your trading, he's your guy. While it was tough for me to trade, teach, and write simultaneously during those years -- which is one reason my market attention is now focused 100% on trading during the day -- I enjoyed the experience and more importantly, our relationship. Larry is a man of exceptional integrity and character and has seen my trading records first hand over the years. He was also highly supportive when my youngest daughter was diagnosed with Type 1 Diabetes five years ago at age 11, and put one of the biggest smiles I've ever seen on anyone when he sent "Wags" -- a stuffed dog about the size of my daughter -- as a gift during her initial fight. Wags is still an important member of the family, and that was a thought that I'll never, ever forget.
Times change, but people don't.
Tuesday, October 7, 2008
Tuesday Notes - Back to Work
2:00pm Well, as much out of step I was with the market in yesterday's debacle, today's been pretty much error free and I'm going to keep it that way by shutting down for the day here with the release of the FOMC minutes.
With respect to going back to work after yesterday, I must say that while I normally have no problems going back to work after a Driver's Ed Video day -- which has been my strength over the years and formed the foundation for this year's cornerstone concept -- I tossed and turned a great deal last night thinking over the day. Fortunately the Sox won and helped my mood a bit, and I'd also like to thank Ronin for his pick-me up comments last night -- that's what this evolving forum is all about as we work to strengthen each other.
So I had the following checklist coming into today:
Reduce size - Check
Don't force anything - Check
Get into EESM mode - Check
End the morning green - Check
End the day green - Check
I said recently the market seldom does the same thing on Day 2, and that certainly held true today where liquidity-providing fades were very high probability and all worked out well.
What did surprise me frankly was that by 2pm, I ended up recovering a whopping 30% of Monday's draw and have now come back almost 70% from my low point on Monday. Even I'm having a hard time believing that.
Thankfully, life is full of tomorrows ... and we have another one, well, tomorrow.
And speaking of tomorrow, a reminder that the PalTalk Lounge will be open for a beta test Wednesday evening at 7pm ET. Virtual drinks are on me.
With respect to going back to work after yesterday, I must say that while I normally have no problems going back to work after a Driver's Ed Video day -- which has been my strength over the years and formed the foundation for this year's cornerstone concept -- I tossed and turned a great deal last night thinking over the day. Fortunately the Sox won and helped my mood a bit, and I'd also like to thank Ronin for his pick-me up comments last night -- that's what this evolving forum is all about as we work to strengthen each other.
So I had the following checklist coming into today:
Reduce size - Check
Don't force anything - Check
Get into EESM mode - Check
End the morning green - Check
End the day green - Check
I said recently the market seldom does the same thing on Day 2, and that certainly held true today where liquidity-providing fades were very high probability and all worked out well.
What did surprise me frankly was that by 2pm, I ended up recovering a whopping 30% of Monday's draw and have now come back almost 70% from my low point on Monday. Even I'm having a hard time believing that.
Thankfully, life is full of tomorrows ... and we have another one, well, tomorrow.
And speaking of tomorrow, a reminder that the PalTalk Lounge will be open for a beta test Wednesday evening at 7pm ET. Virtual drinks are on me.
Monday, October 6, 2008
Monday PM Notes - Autopsy
OK, I know I said I wouldn't over analyze today, but looking back for a moment, I'm not feeling quite so bad. Here are a few observations.Let's start with the TICK chart. Note I normally have this chart scaled from -1200 to +1200 and on a 1-min chart, but expanded it here to -2000 to +2000 and 3 min to capture the full picture. First, the low bar at 10:45am was a staggering -1684. Never seen that in ten years of trading. Second, it took about 90 minutes for the TICK to come close to approaching zero from the downside. Can't ever remember the last time that happened ... that's 90 minutes of sustained selling at open without a breath.
Let's now look at the VIX, which reached a 19-year high today. My Tradestation data doesn't even go that far back, and my oldest daughter who's now in college hadn't been born yet.As a member of the Merc, one of our roles is to provide liquidity, a role which requires us to put our own capital at risk so that others can buy and sell even during panic times ... and such infrequent days can often be painful as was the case today. Yet in the long run, we serve a useful role and are more than adequately rewarded for that occasional sharp pain.
In this business, it's truly a case of no pain, no gain, and my eyes remain steadfast on the gains ahead.
Monday Notes - Monday Mess
4:15pm Yes, I took it hard on the chin -- and cheek and neck -- today. I was off my game in the morning, wasn't focused enough, got stubborn, and decided to "invest" some of my hard earned gains by swinging for the fences in the morning, not believing the market would give (throw) up its early low given the opening multi-year 50 VIX reading and strong ten point thrust off the 9:31am lows.
I played it perfectly up to 9:45am, buying the initial thrust down and selling on the spike north. But then, the errors began, perhaps the most crucial being I ignored the 3LB indicator after the initial pop and mis-managed size. Certainly ES wouldn't lose another 40 points below its early low! As the market tanked and the VIX climbed toward 60 .. that's sixty ... I felt like Tom Brady with a defensive lineman around his knee. And I heard the crunch.
Maybe it was looking at my year-to-date results over the weekend when I've said all year I'd careful with that until 12/31. Maybe some invincible feeling bubbled to the surface. Maybe it was lack of sleep after the late night Sox game last night. Maybe God decided I needed to be humbled big time to set up the next run, or it's His sense of humor that I should take the rest of the year off. Maybe ... maybe ... maybe ...
Fact is the real reason doesn't matter so I won't analyze it to death. All I know is it happened and I know better. I'm not a home run hitter ... I'm a singles and doubles liquidity provider and all that swings like that do are tear muscles.
Right now, it's critical that I focus on the good as I head into a rough evening.
- I'm wounded but not dead. Time is a great healer.
- All earnings/losses do are gain/lose time ... so I'm a few weeks younger now.
- The afternoon session was positive.
- I just invested in continuing education for the second time this year.
- On 12/31, this will be a distant memory and the wound will have scarred over.
- %-wise, it's not my largest draw.
- It wasn't a triple digit loss.
- I'll still earn my goal of $1M this year.
- And yes, believe it or not, the financial hit could have been (and was at one point) much worse.
So there it is ... in all its ugliness.
The human element rears its ugly head again.
I'm going to need Wednesday's lounge session ... including a few drinks.
I played it perfectly up to 9:45am, buying the initial thrust down and selling on the spike north. But then, the errors began, perhaps the most crucial being I ignored the 3LB indicator after the initial pop and mis-managed size. Certainly ES wouldn't lose another 40 points below its early low! As the market tanked and the VIX climbed toward 60 .. that's sixty ... I felt like Tom Brady with a defensive lineman around his knee. And I heard the crunch.
Maybe it was looking at my year-to-date results over the weekend when I've said all year I'd careful with that until 12/31. Maybe some invincible feeling bubbled to the surface. Maybe it was lack of sleep after the late night Sox game last night. Maybe God decided I needed to be humbled big time to set up the next run, or it's His sense of humor that I should take the rest of the year off. Maybe ... maybe ... maybe ...
Fact is the real reason doesn't matter so I won't analyze it to death. All I know is it happened and I know better. I'm not a home run hitter ... I'm a singles and doubles liquidity provider and all that swings like that do are tear muscles.
Right now, it's critical that I focus on the good as I head into a rough evening.
- I'm wounded but not dead. Time is a great healer.
- All earnings/losses do are gain/lose time ... so I'm a few weeks younger now.
- The afternoon session was positive.
- I just invested in continuing education for the second time this year.
- On 12/31, this will be a distant memory and the wound will have scarred over.
- %-wise, it's not my largest draw.
- It wasn't a triple digit loss.
- I'll still earn my goal of $1M this year.
- And yes, believe it or not, the financial hit could have been (and was at one point) much worse.
So there it is ... in all its ugliness.
The human element rears its ugly head again.
I'm going to need Wednesday's lounge session ... including a few drinks.
Sunday, October 5, 2008
The Weekend Trader (Sunday Edition)
A few thoughts from this end heading in the new week.
After Hours Lounge - We'll give it shot and open the PalTalk evening lounge as a beta test this Wednesday at 7pm ET to check out the platform, and then open up the bar again Sunday night (I'm thinking those two nights weekly to start). I'm still looking at a few other options, but we'll start here. The software is free at your end and you'll be able to receive and send audio and text, although if you want the live video stream from my camera, you'll need to spring the $15 for their upgraded platform. Just find your way to the Business & Finance / Trading rooms, and the room will be listed there after 6pm ET.
All are welcome, keeping in mind the following few simple ground rules.
1. The intent is a true lounge (not a "how-to trade" or "what's Don going to do tomorrow"), where we can chat and vent about the markets, sports, the purpose of life, or whatever while getting to know each other a bit more.
2. If you haven't already registered via PalTalk, I encourage you to do so with a nickname that at least somewhat resembles your name. Would you really walk into a bar saying, "Hi, I'm guest45678"?
3. There will be a zero tolerance rule for any unprofessional behavior.
Why am I doing this? Simply to provide an optional after market outlet for those interested. Feedback over the years has clearly told me many serious traders are looking to meet with peers outside of the deafening intraday "it's going to the moon", "buy my service", or "trade (but I won't or can't) my call" environments. Yes, I remain outspoken on that and am sick of seeing people put money in people's pockets other than their own.
At this end, I don't care if there's just two of us or twenty, and if it turns out there's little interest, so be it. But I'm willing to give it a shot and pick up the room tab (not the upgrades) to see if it makes sense.
Self Sufficiency - Yes, I got preachy on this in a recent video, and this week's market events have reinforced my belief that people need to learn to become self-sufficient in making their financial decisions -- whether those decisions be minute-by-minute trades, swing trades, longer term investments, etc.
One problem we have in this country is that many of us -- including me at times -- are lazy. We often want others to tell us what to do, we don't have enough faith in our own abilities, talents, or potential, and are scared to act, make mistakes, learn from them, get back up, and continue to improve. That's why many market analysts, boiler room brokers, subscription services, and chatrooms have stolen -- yes, stolen -- money from the unsuspecting public.
If openly sharing my 2008 journey means anything, it's that it takes a never-say-die effort, continual self-forgiveness, and faith to get that Chinese Bamboo to finally break ground. Over the years, I've had to dust myself off more times than Ricky Henderson running the bases and have the shredded pants to show for it.
In the end, this blog isn't at all about me. It really isn't.
It's about you.
After Hours Lounge - We'll give it shot and open the PalTalk evening lounge as a beta test this Wednesday at 7pm ET to check out the platform, and then open up the bar again Sunday night (I'm thinking those two nights weekly to start). I'm still looking at a few other options, but we'll start here. The software is free at your end and you'll be able to receive and send audio and text, although if you want the live video stream from my camera, you'll need to spring the $15 for their upgraded platform. Just find your way to the Business & Finance / Trading rooms, and the room will be listed there after 6pm ET.
All are welcome, keeping in mind the following few simple ground rules.
1. The intent is a true lounge (not a "how-to trade" or "what's Don going to do tomorrow"), where we can chat and vent about the markets, sports, the purpose of life, or whatever while getting to know each other a bit more.
2. If you haven't already registered via PalTalk, I encourage you to do so with a nickname that at least somewhat resembles your name. Would you really walk into a bar saying, "Hi, I'm guest45678"?
3. There will be a zero tolerance rule for any unprofessional behavior.
Why am I doing this? Simply to provide an optional after market outlet for those interested. Feedback over the years has clearly told me many serious traders are looking to meet with peers outside of the deafening intraday "it's going to the moon", "buy my service", or "trade (but I won't or can't) my call" environments. Yes, I remain outspoken on that and am sick of seeing people put money in people's pockets other than their own.
At this end, I don't care if there's just two of us or twenty, and if it turns out there's little interest, so be it. But I'm willing to give it a shot and pick up the room tab (not the upgrades) to see if it makes sense.
Self Sufficiency - Yes, I got preachy on this in a recent video, and this week's market events have reinforced my belief that people need to learn to become self-sufficient in making their financial decisions -- whether those decisions be minute-by-minute trades, swing trades, longer term investments, etc.
One problem we have in this country is that many of us -- including me at times -- are lazy. We often want others to tell us what to do, we don't have enough faith in our own abilities, talents, or potential, and are scared to act, make mistakes, learn from them, get back up, and continue to improve. That's why many market analysts, boiler room brokers, subscription services, and chatrooms have stolen -- yes, stolen -- money from the unsuspecting public.
If openly sharing my 2008 journey means anything, it's that it takes a never-say-die effort, continual self-forgiveness, and faith to get that Chinese Bamboo to finally break ground. Over the years, I've had to dust myself off more times than Ricky Henderson running the bases and have the shredded pants to show for it.
In the end, this blog isn't at all about me. It really isn't.
It's about you.
Saturday, October 4, 2008
The Weekend Trader (Saturday Edition)
I'll title today's post "Mid-Game Adjustments". And yes, I view this year as a game -- a very serious one, more seriously than I've ever taken this business -- but still a game.
Game Within a Game - Events of the last few months -- including both personal performance (that had me attaining a "career" annual goal in three quarters) and increasingly erratic market conditions -- have caused me to think very carefully about how I approach the remaining three months of this journey. In addition, my still-evolving poker skills are telling me to balance (1) protecting the chips accumulated during the first three legs of this year's race with (2) not simply mailing it in or coasting to the finish in the fourth and final leg.
Such is the reason for the stretch goal that I first referenced in my September 23 special post. And such is the reason as I mentioned in last night's video that I've now added a new element to "score" the final quarter of this 2008 game to complete the year, which is to "count down" the amount remaining to attain my incremental "stretch" target of a $250K bonus. I think this best balances the two goals of balancing chip protection with a continued and sustained "fight to the finish". To that extent, I've added a percentage indicator to the left which will help me track my attainment of this bonus.
I think balancing chip protection with sustained performance is tricky at best, yet it's a required balance. Going back to the poker world for the moment, the story of Archie Karas hits home hard. If you're not familiar with his story, Archie once accumulated over $40 Million playing pool, poker and dice -- reaching the top of the gaming world -- only to lose it ALL back in a short period of time. Watching this year's televised World Series of Poker is another analogy where several huge (and inexperienced) chip leaders are giving it all away in a matter of hours.
So I'm not going there. $1 Million may not be $40 Million, but $1 Million can be zero just as quickly. Suffice it to say that I'm essentially viewing this last quarter as I would at a cash (non-tournament) poker game, which is locking up the chips that were accumulated during the first three quarters, and free-rolling the final quarter with no increase in trading size while managing risk carefully in this market that continues to see 10-20 point ES swings in the blink of an eye.
Q1-Q3 Chip Management Evaluation - I need to be careful with this one, because the final chip count still doesn't occur until 12/31/08 and I still avoid looking at the equity balance. Yet as I'm viewing the final three months as its own "game", I think I'm a bit safer in evaluating my YTD performance over the first three quarters without it negatively affecting my future performance. To that extent, I've attached a 2008 monthly "chip stack" chart that reflects how I book my results. (And for those new to this blog, yes the data is 100% real and I'd stake my industry & CME reputation on it, so let's not go there.) You can click on the chart to enlarge.
Here's what the chip stacks reflect. Each month has four stacks:
The first light green stack reflects accumulated daily gains before commissions. So for example, if the day's gross gain is net positive after adding all trades (+ or -), it gets recorded there and is included in the stack.
The second red (negative) stack reflects accumulated daily losses before commissions. Essentially the reverse of above.
The third (negative) orange stack reflects commission costs.
The fourth (negative and barely viewable) yellow stack reflects overhead costs including seat lease and data feed costs.
And the final bright green stack reflects the net result of the first four.
I think the best way to evaluate whether chip management has been acceptable is to compare the first and second daily gain vs. loss stacks, which going back to responses to comments several weeks ago, essentially reflects the only win/loss ratio I ever look at since I view each day's activity as a single trade.
I suppose one embedded concept worth noting is that I view daily losses -- when they do occur as they will -- as anticipated and necessary business expenses just like any other expense such as commissions and business overheads. Another concept is just as I view each day as its own "trade", I also view each month as its own larger "trade", meaning it's mentally closed, is written in stone and can't be undone, yet has zero impact on the next month.
Feel free to share your comments & observations. I still firmly believe it's better to look forward than backwards, and that's where the focus remains.
The counter says we have 88 days to look forward to.
Enjoy the rest of your weekend.
Game Within a Game - Events of the last few months -- including both personal performance (that had me attaining a "career" annual goal in three quarters) and increasingly erratic market conditions -- have caused me to think very carefully about how I approach the remaining three months of this journey. In addition, my still-evolving poker skills are telling me to balance (1) protecting the chips accumulated during the first three legs of this year's race with (2) not simply mailing it in or coasting to the finish in the fourth and final leg.
Such is the reason for the stretch goal that I first referenced in my September 23 special post. And such is the reason as I mentioned in last night's video that I've now added a new element to "score" the final quarter of this 2008 game to complete the year, which is to "count down" the amount remaining to attain my incremental "stretch" target of a $250K bonus. I think this best balances the two goals of balancing chip protection with a continued and sustained "fight to the finish". To that extent, I've added a percentage indicator to the left which will help me track my attainment of this bonus.
I think balancing chip protection with sustained performance is tricky at best, yet it's a required balance. Going back to the poker world for the moment, the story of Archie Karas hits home hard. If you're not familiar with his story, Archie once accumulated over $40 Million playing pool, poker and dice -- reaching the top of the gaming world -- only to lose it ALL back in a short period of time. Watching this year's televised World Series of Poker is another analogy where several huge (and inexperienced) chip leaders are giving it all away in a matter of hours.
So I'm not going there. $1 Million may not be $40 Million, but $1 Million can be zero just as quickly. Suffice it to say that I'm essentially viewing this last quarter as I would at a cash (non-tournament) poker game, which is locking up the chips that were accumulated during the first three quarters, and free-rolling the final quarter with no increase in trading size while managing risk carefully in this market that continues to see 10-20 point ES swings in the blink of an eye.
Q1-Q3 Chip Management Evaluation - I need to be careful with this one, because the final chip count still doesn't occur until 12/31/08 and I still avoid looking at the equity balance. Yet as I'm viewing the final three months as its own "game", I think I'm a bit safer in evaluating my YTD performance over the first three quarters without it negatively affecting my future performance. To that extent, I've attached a 2008 monthly "chip stack" chart that reflects how I book my results. (And for those new to this blog, yes the data is 100% real and I'd stake my industry & CME reputation on it, so let's not go there.) You can click on the chart to enlarge.Here's what the chip stacks reflect. Each month has four stacks:
The first light green stack reflects accumulated daily gains before commissions. So for example, if the day's gross gain is net positive after adding all trades (+ or -), it gets recorded there and is included in the stack.
The second red (negative) stack reflects accumulated daily losses before commissions. Essentially the reverse of above.
The third (negative) orange stack reflects commission costs.
The fourth (negative and barely viewable) yellow stack reflects overhead costs including seat lease and data feed costs.
And the final bright green stack reflects the net result of the first four.
I think the best way to evaluate whether chip management has been acceptable is to compare the first and second daily gain vs. loss stacks, which going back to responses to comments several weeks ago, essentially reflects the only win/loss ratio I ever look at since I view each day's activity as a single trade.
I suppose one embedded concept worth noting is that I view daily losses -- when they do occur as they will -- as anticipated and necessary business expenses just like any other expense such as commissions and business overheads. Another concept is just as I view each day as its own "trade", I also view each month as its own larger "trade", meaning it's mentally closed, is written in stone and can't be undone, yet has zero impact on the next month.
Feel free to share your comments & observations. I still firmly believe it's better to look forward than backwards, and that's where the focus remains.
The counter says we have 88 days to look forward to.
Enjoy the rest of your weekend.
Friday, October 3, 2008
** VIDEO ** Turning Regret Into Performance
Here are some thoughts on today's VIX, turning "regret" into performance, and why I'm continuing to pass on Expo speaking invitations.
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