She Comes In Innocence and Patchouli

Added on by C. Maoxian.

Not incense, innocence. Al Stewart reminds me of some famous actress, the body language, the eyes, but I can't figure out who (figured it out, he reminds me of my daughter's Kindergarten teacher) .... Great song. 

Notes for Chat with Traders, Episode 151

Added on by C. Maoxian.

Episode 151 ... Rick Lane (66:03)

Trading Technologies CEO
Recently purchased trade surveillance software company, Neurensic
Finding bad behavior while avoiding false positives
Accurately identifying trader intent hard to do
Machine learning can be applied, fewer false positives
Neurensic score useful for compliance
MiFID II compliance ... European financial regulations -- futures markets
Every algo needs to be tested, see if it sets off red flags
AI will have applications across trading, not just compliance
MiFID II becomes live January 2, 2018 ... all automated traders aware of this
Lane formerly worked for consulting firm, modeling and simulation of war games, combat modeling, terrorist network growth
Cousin was big floor trader in interest rate futures
Cousin anticipated end of physical trading floors, knew everything would be automated
Cousin invited Lane to come work in Chicago
2005 the trading floor was still madness, 2006 you could hear a pin drop
Applying graph theory to terrorist network modeling
He's a coder, not a trader
Built visual interface that floor traders could use on their handhelds, any dummy could use it
[Lane has similar voice and pacing as Obama ... a Chicago thing?]
Technology had disrupted every industry, cousin anticipated same for futures trading
Georgia Tech undergrad, zero exposure to financial markets
Took him six months just to learn the mechanics of markets (what's a bid and offer, etc.)
Ultra-low latency trading strategies can be dangerous, need serious safeguards
Trading tools as loaded weapons ... risk of serious loss
Writing code for traders serious business, can't be cavalier
Software they wrote for internal purposes called "Algo Design Lab"
Trading Technologies, the 800-lb. gorilla, didn't have anything like their tools in 2008  
Trading Technologies acquired their software in 2010
Lane left and went to Google, but came back to TT within a year
He's a developer who is also a CEO ... an analytical thinker, still builds code to this day
Scale and latency problems guys at Google face are a cakewalk compared with FinTech problems
Shaving five microseconds off from tick to trade is a great  challenge
30 milliseconds is a lifetime (time to return Google search results)
Different exchanges, different rules, different regulatory regimes -- all challenging problems to solve
The most sophisticated hedge funds / prop firms have already reached the limits of latency race (nanoseconds ... speed of light constraints)
Trading algos embedded in FPGA, in silicon chips, in network switches
Making a fix in an embedded algo in a network switch hard to do
Hardware-based solutions for automated trading makes it fast, software too slow
Switches themselves can decode price updates, gain meaning, and change its own price; never sent to server
TT has big internship program
Definition of "trader" has fundamentally changed in recent years
Now traders are all computer science, math, engineering grads [not Neanderthal basket weavers like me]
www.tradingtechnologies.com
Twitter: @r1ck_l4n3

 

TV Shows Watched -- Shooter

Added on by C. Maoxian.

A Twitterer appreciated my recommendation of "Fauda" and tried to return the favor by recommending that I check out "Shooter." I watched the first episode from the first season and wasn't thrilled for the following reasons:

  • War Porn
  • Fetishizes guns (and I'm a pro-gun guy)
  • Fetishizes violence, including political assassination
  • Token black characters (but don't worry, one is immediately killed off)
  • Weak acting
  • Lame made-for-commercial-TV vibe
  • Dumb story

I won't continue to watch this one and don't recommend it.

Practice Pumpkins (though not filled with red food coloring)

Practice Pumpkins (though not filled with red food coloring)

Everything Looks Perfect From Far Away

Added on by C. Maoxian.

Great cover ... love this girl's voice, reminds me of Tracyanne Campbell's (of Camera Obscura) ... hilarious crowd shots in this video ... when I was a kid, we took a trip to Scandinavia and were in Finland ... we took a public bus somewhere and had to walk to the back of the bus, and when we got to the back, my family spontaneously burst into laughter because we'd never seen a more grim-looking group of people in one spot -- sort of like this crowd of killjoys. The hipster band's energy offsets them well. 

Notes for Chat with Traders, Episode 148

Added on by C. Maoxian.

Episode 148 ... John Grady (83:26)

  • 41 years old
  • Learned about Level 2 at prop firm in Colorado
  • Next worked at prop firm in Chicago
  • In Chicago was the first time he saw Depth of Market (DOM) for futures
  • [Has a southern twang, wonder where he's from?]
  • Look for big orders
  • Guys on the floor weren't geniuses, they just understood order flow
  • Left prop firm, on his own now for ten years
  • Order book also know as Depth of Market (DOM) matrix
  • When you see market orders wiping out limit orders, you know someone is moving size
  • Volume is most important, price chart doesn't represent volume as well as the DOM
  • Important volume to watch is at each price within the DOM (horizontal bar) 
  • Jigsaw is the DOM he uses
  • Trades Treasuries exclusively
  • Treasuries are liquid, logical and steady ... bank-traded and the banks are trading spreads 
  • Crude oil, for example, is thin and erratic ... easily manipulated
  • Can't ramp up your size trading gold, for example, you'll max your size at 10 or 20 contracts
  • With Treasuries you can trade 100 or 200 contracts the same way you can trade a ten lot
  • He trades outrights, only watches the spreads, doesn't trade them
  • Market context is important, depending on the regular news releases
  • No real average number of trades for him, can go from two to twenty trades a day
  • Extraordinarily boring to take three trades a day as an order flow trader, but that's the job
  • Trading requires tremendous patience and discipline
  • Almost all of his losses are the result of forcing trades out of boredom
  • People who trade from home need ten times the discipline (no in-office banter to distract them)
  • You start surfing the net out of boredom, that's the exact moment a trade sets up
  • When you see you've missed the trade, you chase, and end up losing (of course)
  • He might hold a trade for ten seconds to ten, twelve, twenty minutes
  • Market moves two ticks in his favor, he can always scratch the trade
  • On average holds trades three to twelve minutes
  • Retail traders try to trail a stop instead of just taking a trade off -- a mistake
  • If he gets out too early, he'll instantly re-enter
  • He figures out his trade size based on the situation
  • He think in terms of ticks, how many ticks will he possibly lose, sizes appropriately
  • Sometimes you need five ticks of leeway, just have to give it room, size appropriately 
  • Never move your stop loss
  • Don't turn a planned three tick loss into an eight tick loss by pulling your stop
  • He always places an emergency stop loss in the market (3-5 ticks away)
  • Manually figures out the exit, Treasuries liquid enough to do this
  • He markets out, doesn't want to chase out with a limit order
  • He always wants to use a limit order, but often circumstances don't allow
  • Use a market order to get the fill, sometimes you just have to pay up
  • He goes all in and all out, no scaling
  • Don't screw up your risk reward by scaling in or scaling out
  • Most people screw up scaling, they average losers and minimize their winners
  • Big differences among markets ... must choose the right market to trade
  • To trade DAX you need orders in the book, it can reverse in seconds ... too thin!
  • Automated orders are essential in thin markets like DAX or Gold
  • Liquid markets like Treasuries, S&P, Bobl, Eurostoxx, can use discretion, manually adjust orders
  • Try to watch total amount of contracts at each price
  • Specialize in one market, study that one DOM and only that
  • Same players in the same markets every day, they behave consistently
  • You must record your trading screen or do market replay
  • Pay attention to market turning points when you're watching the replay
  • Fast forward, rewind, pause ... study the replay closely.
  • You will learn more from watching replays for a month than you will from journaling trades for a year
  • You need a lot of study and screen time with a good DOM
  • Only three good depth of market providers:
  1. Jigsaw has inside columns, uptick/downtick splits are key column, exlcusive to them ($50 a month, stupid cheap)
  2. TT's X_Trader
  3. CQG
  • No subsititute for screen time
  • When learning, watch two to three hours a day, don't watch all day
  • Then open a live account and start trading one lots, enter the fire
  • Anyone trading a longer time frame doesn't need the DOM
  • Most people shouldn't swing trade: too many things can happen to take you out
  • HFT can spike things up and down in seconds
  • If you think you know where the market will be in two hours, you're delusional
  • People who understand fundamentals, that's a different kind of trading
  • Swing trading is the worst, just crazy that people try to do it
  • He's never met a successful swing trader, and he's been around awhile [me too]
  • You can predict the next six minutes better than you can the next sixty minutes
  • If you trade size, you can scalp for six cents ... sensible only with serious size
  • Fifteen or even ten years ago, the speed of trading very different
  • You could hit a big order as it was leaving, not anymore!
  • HFTs try to be in a breakeven trade immediately
  • HFTs will instantly scratch if they think they're on the wrong side [they never reveal scratch rate]
  • HFTs want to risk nothing to make something 
  • You need to be able to anticipate so much more in the age of HFT
  • There's a lack of volatility today too, so much volume now, nothing can run anymore
  • His edge is in his discretion
  • If AI develops that can replicate that human discretion, the human traders will not be able to compete
  • Best AI can already beat best human chess players, trading similar to chess
  • The big guys have the speed locked down, huge unfair advantage
  • Market makers game the time-price priority of the book
  • HFT get a free look from their constant partial fills [the bastards], you can't compete with that
  • By knowing your market, you can spot the spoof orders more easily
  • Spoofing happens all day every day
  • "Order Flow Basics" -- basic principles video
  • "Order Flow Scalping" -- a popular video of his
  • www.nobsdaytrading.com
  • Twitter: @nobsdaytrading

Movies Watched -- The Dark Horse

Added on by C. Maoxian.

124 minutes long so at least 24 to 34 minutes too long. A W.D. By movie (written and directed by the same person). It started off well. About a mentally ill Maori guy (New Zealand) ... one-time chess champion. You feel bad for him, mental illness is no joke. I was not aware of the whole Maori underclass thing, so that was enlightening. "Genesis" ends up finding some purpose in life by coaching a chess club for poor Maori kids. 

There are some good lines, some good scenes, but it ran too long. And it was kind of hit you over the head preachy in the end. I loved it at first, then only started liking it, and by the end, I wasn't that thrilled with it. If you're interested in mental illness, the Maori underclass, or chess, you might want to see it ... otherwise avoid it.

A king for a king

A king for a king

280 Killed Twitter

Added on by C. Maoxian.

Since Twitter rolled out the 280 character limit, my timeline has been destroyed. All of the charm and cleverness that the service once had is gone. I follow around 295 people ... about 25 have them have quit Twitter (since T___p was elected), and a half dozen or so have unfollowed me since I said I'd block anyone who tweeted >140.

This month I will systematically go through my following list and unfollow anyone who is tweeting over 140. I might end up following no one this way, but so be it.  You can rest assured that none of my tweets will ever exceed 140 characters. 

deadtwitter.jpg

Movies Watched -- Eye in the Sky

Added on by C. Maoxian.

Under the sacred 100 minute mark, so it had that going for it ... the end credits were like 10 minutes long. Sort of reverse War Porn but I wasn't buying any of it. Somali Al-Shabaab Islamic crazies in Kenya ... Colonel "Big Balls" Mirren has finally tracked down several people on the "kill list" and it's time to take 'em out with a drone strike. Trouble is a bunch of Guardian-reading British politicians throw a spanner in the works when the collateral damage estimate comes in a tad high. They have to keep "referring up" to a higher level of Guardian reader to know "where we stand legally."

Jesse Pinkman is the weepy American drone operator accompanied by some big-eyed girl also given to tears. Look, the real drone guys would be high fiving each other given this opportunity... they would be chomping at the bit to blow away some bad guys after doing *years* of boring surveillance runs. Finally, finally we get to kill some people! Oh, there are some kids playing in the street nearby? Tough shit, this is war. The pan flute and violin score ain't going to tug on these heartstrings.

Do we have the authority to prosecute the target? Hell yes! And why are you talking like a lawyer, asshole? 

You remember we dropped two *atomic* bombs on cities *full* of civilians, yes? And you remember we fire-bombed every major Japanese city for THIRTY days straight (and the rotten bastards still wouldn't surrender?). Remember when we dropped hundreds of thousands of gallons of *napalm* (thanks, Dow Chemical) across the Vietnamese jungle? We're not going to go all weak in the knees because there's one kid selling a loaf of bread nearby. Got-damn weak Baby Boomers have ruined everything!

There are no beetle- or bird-sized drones. We don't have that technology yet. Shameless pandering to China scene where the US Secretary of State is playing ping pong there ... thankfully brief. Can't recommend this one ... it's unrealistic, the premise is bullshit ... and though it was not overly long, it could have been even shorter. 

Jesse Pinkman, teary-eyed drone operator

Jesse Pinkman, teary-eyed drone operator

Configurable Buttons at Interactive Brokers

Added on by C. Maoxian.

Took me about six months to set up my buttons the way I like them in Interactive Brokers' Trader Workstation (TWS). Here are all the things you have to figure out ... useful ones are Add Target Limit Order, Buy, Sell, Duplicate, Increase and Decrease (size): Modify, and Presets. 

button01b.jpg

Movies Watched -- Arrival

Added on by C. Maoxian.

116 minutes long so at least 16 to 26 minutes too long.

SPOILERS. Mind-bender movie. Alien invasion. If I understood it correctly, the aliens give the gift of their squid-ink language because they're going to need our help in 3,000 years time. For learners of their language, time becomes non-linear. Does this make sense? Wouldn't that change the whole nature of life on earth? I wasn't thrilled with this. 

Have I seen Amy Adams in anything before? Can't remember. Also stars Jeremy "Ugly Bourne" Renner, Forest "Sleepy Eye" Whitaker -- a token black guy who surprisingly isn't killed, and the charming Jewish mobster, Arnold Rothstein -- here a CIA agent. I recognized no one else.

There's a large and annoying part given to China and their "General Shang" in a shameless kowtowing attempt to be chosen as one of the handful of American movies that the Chicoms allow into their protected market. On par with "The Martian's" kowtowing -- disgusting.

If it were 20 minutes shorter and cut out the Chinese, I could give it a sort of weak yellow rating, but as it is, this gets a red AVOID rating. 

"If you had your life to live over again...."

"If you had your life to live over again...."

Movies Watched -- The Witch

Added on by C. Maoxian.

I haven't watched *any* movies from 2016 so I'll start to work my way through the top 100 now. 

92 minutes so within the sacred 100 minute mark. I was a little leery since The Witch is a W.D. By movie (written and directed by the same person, which means it's their baby, for good or ill). Surprisingly, I enjoyed this one. I'm not big on horror but there were no jump-scares or other cheap ticks in this movie, thankfully ... it's more of a witchcraft thing ... 1630s America, you know, 60 years before the Salem Witch Trials. Well plotted, well acted, well done ... and scary. 

Don't see it if you're sensitive ... kids definitely should NOT see this ... but if you're a jaded old guy like me, you will enjoy it. 

Wouldst thou like to see the world?

Wouldst thou like to see the world?

Notes for Chat with Traders, Episode 89

Added on by C. Maoxian.

Episode 89 ... Blake Morrow (80:41)

  • Lives in Phoenix, Arizona
  • Went to college after getting out of military
  • Mid-1990s, stockbroker friend asked him to join firm since he had gift of gab
  • Got the job, got Series 7 and 63
  • He was good at selling over the phone but he wasn't interested in the job
  • Stockbroker friend sat with market maker for several months, learned to trade
  • SOES Bandits from Block Trading made front cover of Inc. Magazine [I remember it well]
  • Went to Scottsdale office of Block Trading and started day trading
  • Lost 60% of his account in first six months, rich guy had staked him
  • Turned things around, did well for himself [doesn't say how?]
  • Moved to Dallas, opened a day trading office
  • Sold direct access trading company to Wize Trading Group
  • Been with Wize Trading Group ever since
  • No Pattern Day Trader rule when he started
  • Was using 20:1 margin in the early days
  • No one traded from home, didn't have the technology, would go to an office
  • First book he read was Mark Douglas' Disciplined Trader
  • Rich guy who staked him also paid for Blake's education with various chartists
  • Rich guy wasn't too alarmed when Blake lost 70% of his money in six months
  • Blake was 26 or 27 when he started [born 1970?]
  • Dot com boom bailed him out, Blake did well, rich guy did well
  • Blake ate a lot of ramen noodles, peanut butter, and bread during lean times
  • Mom had a rental property in Phoenix which she let him use at favorable rate
  • If you want to trade for a living, can't be stressed out by the money
  • Blake was young, no family, no kids, could take a lot of risks
  • He was lucky to have caught some dot com stocks which gave him a cushion
  • Backbone of his trading: patience, waiting for the market to set up
  • No trader education back then, he just learned by trial and error
  • Let the trade come to you, don't chase
  • Risk-reward a concept he picked up early in his career
  • His buddy who sat next to him acted as drill sargeant and trading companion
  • Learned by studying charts, which were taboo at the time
  • 2003-2004 stopped trading stocks, started trading currencies exclusively
  • His analysis isn't fancy, same as 20 years ago
  • Matches up indicators and trendlines which causes him to act
  • Looks for pullbacks, Fibonacci levels 38% 50% 62%
  • Matches Fib levels with trendlines and indicators like the RSI
  • Trading isn't glamorous, it's boring
  • Everything in nature has some Fibonacci relationship
  • Human emotions also have Fibonacci ratios [things that make you go hmmm]
  • Fibonacci retracements and extensions places where human emotions are
  • Fibonacci confluence or clusters are things you look for
  • He wants to buy what people are selling and sell what people are buying
  • Managing risk an important part of trading
  • Looks at Fibonacci clusters as a "zone"
  • Japanese candlesticks are valuable tools, esp. the daily candle
  • Loves trading the markets, in front of screen 15 hours a day
  • Gets up extremely early since he's in Arizona
  • Has company called Forex Analytix with Nicola Duke and others
  • He's Chief Currency Strategist at Wize Trade Group, hosts webinars
  • Markets not like a bike, if you get off, you won't remember how to ride it
  • Have to stay engaged with the markets or you'll fall out of touch
  • Likes ForexFactory calendar
  • Likes ForexLive website
  • First question always: What is my risk? Where do you get out when you're wrong?
  • Don't risk more than 1% in a single trade
  • Don't paper trade, trade micro-lots instead
  • Have to feel the pain of losing $5
  • Save your money, you need more than the "minimum" to start trading
  • Practice using the platform with tiny amounts
  • Stay with big name currency brokers that are highly regulated
  • Swiss National Bank surprise decision wrecked some big UK-based currency brokers
  • Blake says some kind things to Aaron in parting
  • www.forexanalytix.com
  • Twitter: @PipCzar