Notes for Chat with Traders, Episode 120

Added on May 30, 2017 by C. Maoxian.

Episode 120 -- Mebane Faber (72:32)

Biotech equity analyst [which firm?] while going to grad school
Moved to LA in 2006
Started Cambria 2007
Chatted about stocks with his father growing up
Worked for a CTA
Interested in trend following
[What is Cambria? Research maybe? Not clear....]
Money management, ok they have mutual funds
Enjoys skiing
Everything they do is rule-based, quantitative
Value investing + trend following the ideal
Mutual fund managers skim 1.25% [How much does Cambria skim?]
Fund managers know their product is expensive and tax-inefficient, so they don't buy it
Triumph of the Optimists (his favorite book)
Global Investors Yearbook by Credit Suisse (great, free resource)
5-2-1 Rule ... Stocks 5% Bonds 2% Bills 1% (real long-run returns)
Market-cap-weighted indexes, price of the stock times shares outstanding
US is half of world market cap
Home country bias, gives you concentration risk
[Does Faber have a CFA?]
Maybe 20% of the stocks contribute all the positive returns
It's the best time to be an investor in the history of investing (low cost portfolios)
Robo-advisors -- re-balance for you, tax-manage them for you
Fund business very predatory, high fees, tax inefficient
There are even ETFs now that have a negative expense ratio
Index funds -- market-cap-weighting, low turnover, low cost
Change weighting methodology, you'll outperform market-cap-weighting
Start with US 60-40, then add global, then add real assets
Then move away from market-cap-weighted to momentum (trend following) and/or value
Wealthfront, Betterment [never heard of them]
Most people don't have a written investment plan
Emotional component of long-term investing the hardest, people panic
January 2000 the AAII survey was at its most bullish ever (greed)
March 2009 the AAII was at its most bearish ever (fear)
Why pay an advisor 1% a year? [Big expense best avoided]
10-year PE ratio as anchor, gives you common sense check (CAPE ratio)
Japan was half of global market cap in the late 1980s
Correct mathematical choice is to invest all of your money right now (global multi-asset class portfolio)
Rebalance tax efficiently
Afraid he's putting listeners to sleep
Taxes (high turnover) and fees (high fees) way more important than asset choices
Hedge funds sexy but taxes and fees are killer
Average mutual fund fee 1.25% would kill the best performing portfolio to worst performing over the long term
People should think about fees (and taxes) and almost nothing else
People struggle with their emotions the most
They don't teach personal finance or investing in high school or college
They don't teach how to manage money in school
Mutual fund salad -- people hold 30 funds ... just sell everything and start over (consider taxes)
People outside US esp. killed by fees (no Vanguard)
www.mebfaber.com
Twitter: @mebfaber

ETF Trading Portfolio Update -- May 29, 2017

Added on May 28, 2017 by C. Maoxian.

No changes this week.

(Recall that we've dropped DZZ and replaced it with GLL ... I'll remove the DZZ line item in next week's posting.)

ETF Trading Portfolio Update -- May 22, 2017

Added on May 28, 2017 by C. Maoxian.

No changes this week.

Notes for Chat with Traders, Episode 121

Added on May 26, 2017 by C. Maoxian.

Episode 121 -- Michael Mauboussin (57:11)

Pronounced Mo-bisin (like Larry Curly and Mo)
Works for Credit Suisse
Liberal arts major
Did training program at Drexel Burnham Lambert
Gravitated to research
Junior analyst job
Hired by First Boston, early 1990s
Morphed into a "Strategist"
Teaches at Columbia Business School
25 years of teaching security analysis
Kahneman, Tversky behavioral studies: humans rely on rules of thumb with decision making
Humans have cognitive limitations
Auditing quality of decision making
Valuing process over outcomes
How much of a role did luck play?
Heuristics and biases -- shorthands lead to biases
Prospect Theory
Overconfidence -- projecting narrow outcomes
Confirmation bias -- we seek information that confirms view, dismiss new information
Recency bias -- weighting recent events, not a larger sample size
How to combat confirmation bias? Keep an open mind
Phil Tetlock -- "beliefs are hypotheses to be tested, not treasures to be protected"
Bayes Theorem -- new information, update views
Your views should be tenuous [tell that to a priest!]
Framing -- how you present the problem skews things
Intuition is robust in a stable or linear realm (chess)
Usefulness of checklists -- pilots have them, keeps them consistent
Do-confirm checklists
Read-do checklists (for emergencies)
Stock down 10% versus the market, investors take out their read-do checklist to react calmly
"Think twice" -- inside outside view
Analysis paralysis -- some domains more information *isn't* better
Paul Slovic -- tested handicappers, accuracy of bets didn't get better with additional information, but confidence soared
Professionals don't want too much information, just the key information
How to combat indecisiveness: do you need to move or not?
Technique to get you moving: write down plus / minus columns
Techniques to surface alternatives: "pre-mortem" pretend decision worked out *poorly* by projecting into future
Spend as much time as you can reading, exposing yourself to different points of view
Cognitive neuroscience
Hyperbolic discounting -- future self is good, self at moment is bad
Humans want immediate gratification while promising to be good in the future
Link things you like with things that you don't like
Treadmills (hard) and podcasts (fun) -- one way to motivate self
Split brain patients -- left versus right hemisphere activity
Left hemisphere has the "interpreter" -- links cause and effect
Humans love stories (narratives)
Statistical arguments are palid, while a story is salient
Be a good storyteller, don't spout dry statistics
"Tales from Both Sides of the Brain" -- good book
Gazzaniga Scientific American articles
Keep a journal of your decisions (date and time it)
Go back and audit quality of decisions
Hindsight bias and creeping determinism
Skill dominant games -- the best player wins
But games where probability matters, process is all important
Good outcomes, horrible process
Adherence to good process, will win over time
World is dynamic, can only have components of process
Process must be transparent, economically sound, mathematically devised, repeatable
Fascination with Richard Dennis, Turtle Traders
Curtis Faith book on Turtles
Skill versus Luck
Mauboussin an avid athlete
Loved Michael Lewis's Moneyball book -- sticking to process
Taleb's 2001 book didn't quantify where the randomness was [annoying]
Short run luck will dominate, long run will zero out; then skill will shine
Techniques to isolate skill from luck
82 NBA games a season, large enough sample to work with
All great investors think probabilistically
All great investors always have odds in their favor (positive expected value)
All great investors understand the role of time
Live to see another day -- "preserve optionality"
Puggy Pearson advice best: Understand the 60:40 end of a proposition (edge), money management (how much to bet), and knowing yourself (know your psychological shortcomings)
www.michaelmauboussin.com
Twitter: @mjmauboussin

Notes for Chat with Traders, Episode 122

Added on May 24, 2017 by C. Maoxian.

Episode 122 -- Doug Cifu (39:38)

Co-founder of Virtu
Formerly a corporate lawyer
Formerly a partner at Paul, Weiss, Rifkind, Wharton & Garrison in NYC for 18 years
Fast talker, sounds like native New Yorker
Private equity firm General Atlantic a client
General Atlantic had idea that exchanges would become electronic, for-profit
He was the lawyer representing GA in all their investments
Met New York Mercantile Exchange (NYMEX) chairman: Vinnie Viola
Vinnie Viola asked him to leave Paul, Weiss and partner with him to found Virtu in 2008
Virtu is an electronic market making firm
"Old school market maker" using latest technology and automation
Vinnie was a local risking his own capital, just wanted to make a tick
Provider of liquidity without customer order flow
Doing one thing, doing it well, and repeating it
Latency arbitrage isn't illegal or immoral
Data centers in New Jersey, data centers in Illinois
Spread Networks: it's not evil, it's just commerce
Evolved to microwave network transmission, even faster
Being faster by a microsecond isn't a sustainable business model
Virtu takes no directional trades, they think they can make a tick
They don't pray for mean reversion
Trading 4.5MM times a day
Bias based on bid side or offer side being stronger, classic market making
The old rewards available to market makers don't exist anymore
For example, specialists got 25 cents a share (the spread) in 1982 on NYSE for holding inventory on blue chips
Wins 51% of time (usually) ... will never disclose scratch percentage [but it's obviously huge]
Michael Lewis running around with his hair on fire
Big barrier to entry to what they do, smaller firms can't succeed
Madison Tyler consolidation in 2011
To be US equities electronic market maker, costs are enormous ($70MM a year), market data, connections
Co-location at data centers, infrastructure, footprint incredibly expensive, wouldn't be profitable for equities alone
Their business is a scale business
Little guys can't make it, must sell out (to Virtu)
Putting out bids and offers is taking risk, so lots of pre-trade risk controls, including human involvement
Hubris is a horrible vice
Virtu went public April 2015
One losing day in five years, operational error, mistake to put that info in, Cifu's fault
Not an arrogant cocky firm ripping people off
We're not swinging for the fences, just hitting singles
Regretted putting "stupid histogram" out there
Guys at ZeroHedge writing crap about it
Michael Lewis's book true of market in 2009 but not 2015, "didn't really know what the hell he was talking about."
Lewis is anti-money, anti-Wall Street ... "he's a capitalist dressed up like a communist"
Lewis wrote fictionalized nonsense
Markets have gotten more efficient, it's *better* than the old days because of firms like Virtu
He was "a reasonably smart young man"
Worked his ass off in high school, got into Columbia, worked ass off there
Got into Columbia Law School, worked ass off, got into Paul Weiss, worked ass off to become a partner
Kept eyes open, learned a lot about a lot of different things, was well rounded
Worked on top-flight deals, big M&A deals, exposed to a lot of stuff
Met Vinnie Viola, became good friends, they worked well together
Need some innate ability, but he's "the dumbest guy at Virtu," must work your ass off
Hire really smart people and empower them
Be modest enough to know what you don't know
No politics at Virtu, flat organization
His success based on hard work, many people helping him out along the way
No clue about financial markets in 2008
Titles are bullshit, don't have them at Virtu
"I'm a smart guy, I can figure it out"
Vinnie took the risk on a "loud-mouthed lawyer" like him
Client used to call him "Dougie Large, the man in charge" (because he's a little overweight)
Twitter: @Dougielarge

Notes for Chat with Traders, Episode 123

Added on May 23, 2017 by C. Maoxian.

Episode 123 -- Darren Reed (107:04)

Great episode, this guy is the real deal.

Former stock broker, former head trader at hedge fund, currently a prop trader
Grew up in South Africa
Went to public school, rugby team was good, wanted to play first team rugby
School bred attitude of grit, though underdogs through teamwork they can beat the rich kids
Dad is airline pilot, started as mechanic, parents immigrated to Australia (Perth)
Loved the team culture, loved competition
Uncle a pastor in Connecticut (Stamford and Greenwich) hooked him up with hedge fund guys
Interned at New York hedge fund just out of university
Felt at home whe he first saw the trading floor, the energy, the competitive spirit
Started in back office, lots of tedious, menial labor (that has since been automated)
Visa issues, had to go back to South Africa, parents said come to Perth
In Perth 2004 -- just good timing, mining boom, vast wealth creation [because of China demand]
First job: retail desk assistant at brokerage firm, did grunt work
"DTR" -- designated trading representative (licensed position to enter orders)
"DMA" -- direct market access
Watching order flow all day tick to tick
Good execution appreciated by brokers, everything automated now though
He held the order book, could feel the order flow, developed a sense of the market
Takes time to develop your craft, later can take advantage when opportunities arise
Algo execution killed the old manual order book
"Making chicken shit look like chicken salad" in sales [love it!]
You must be self-aware
Moved to Sydney, started trading at prop firm
He had success early on which is the *worst* thing that can happen to you
Skills have learning curve, baby learning to walk, surfer falling off board
Profitable at beginning through blind luck, got cocky
Intuitive sense developed through watching trading book
Be at your worst when you're at your smallest
Learning curve as a trader steep, you are losing money, it's hard
He was a one-trick pony, could make money in volatile environment, was lost when volatility died
Froufrou fairy dust theory of why you get hurt repeatedly at first: it's all karma
Doesn't use charts much
Tries to figure out who is trapped, who is under pressure
Read order flow on a tick by tick basis
Australia prop traders futures-based, like Europeans
2008 blew up all the volatility traders
Markets change, advantages get arb'd away
You need a diversified trading group -- different strategies, different products, different time frames
Got a job at Sydney hedge fund, $300MM under management
Took old Darryl's advice: "Get your bum in a good seat and sit tight."
Hedge fund world highly regulated, he hated meetings, crossing t's, wanted to quit and did so
Trader development is serious biz -- handling hopes and dreams of kids
Qualities of good trainers: self-aware, know their strengths and weaknesses, honest transparent people, doesn't cover up weaknesses, you can't "solve" trading or golf, not a glamorous lifestyle, no Ferraris or phoning it in from a yacht [LOL]
Trading is a grind, bloody hard, don't believe the BS
Guys who admit bleeding, re-learning, evolving, they're real, seek them out
Qualities of good trainees: they have grit, bulldogs who won't let go, will take YEARS of struggle and grind; guys who have had hardship are best, they can grind; people who don't let go of their dreams; competitive drive; intelligent but not TOO intelligent; people who are too smart try to figure things out, that's why they fail; empty cups, no experience best; put the work in themselves, don't expect to be told what to do
Not about being given "set-ups," it's about developing skill
"Environment is everything" -- special forces, great teams, lifted by pack in right environment
Trader sitting at home can't replicate prop trading environment
Need little financial encumbrance to start, can't have pressure to make money
Research the prop firm first, ask good questions
Need one or two year profitable track record (can be misleading if sample size small)
Pass the "pub test," no track record but enthusiastic
Mow lawns and wash cars to build a trading stake
Must work your ass off, sitting staring at screens for hours on end, no glamour, incredible grind
Incredibly boring work in a sense, no one talks about this [Twitter as outlet]
Income is incredibly variable, struggle for 50 weeks, make a killing [or get killed] in two weeks
Pressure of being a solo small business, live and die by your own hand, hard struggle day after day
People denigrate competition and achievement now, society getting weaker, why people are struggling, [Yes, western world in decline, standard of living deserves to fall]
Trading not fun and games, bloody hard work
www.CygnetTrading.com.au
Twitter: @LiftTheOffer

Notes for Chat with Traders, Episode 124

Added on May 22, 2017 by C. Maoxian.

Episode 124 -- "madaznfootballr" (72:58)

"Max"
Born in 1989?
Lives in California
Trading for six years
"Scalper"
"Rebelling against societal norms"
Made $5 an hour counting cards in blackjack
Sold stuff on eBay that he found or found mis-priced in stores
Studied structural engineering in college
Couldn't get a job after the Great Financial Crisis
Lots of student loan debt
Even when he did find an engineering job, it was a disappointing one
Colleague showed up in Lotus Elise, made money buying BP after oil spill
Max knew nothing about the stock market then
Opened an E*Trade account with $6,000
DANG first stock he ever bought, looking at 15-minute delayed quotes
Eventually found out about live quotes and E*Trade Pro
One year of trial and error, "completely clueless," no one to guide him
Started googling "hot stocks" and "stock tips" led him to message boards
Learned you must be a completely independent thinker
Almost quit in first year, suffered losses and a "damaged psyche"
Cumulative process, one day everything just clicked
Pattern recognition acquired after a year
In hindsight, he should have paper traded
"Money-hungry kid" deprived of a good career
Would go all-in on lots of trades
Play small until you acquire the necessary skills
He was too impatient in early days
Don't overextend yourself
Trading is not easy, it's true that 90% of traders fail
It's the psychological aspect that makes people fail
Worked as engineer for three years, and snuck trades on the side
Saved five times his salary ($300K total) and made two years of six figure gains before going full time
Traded early in the morning before going to his 9 to 5 job
Traded OTC and penny stocks at first
Naturally impatient person, naturally anxious person
Scalping suits his personality
Gets in and out extremely fast
"Typical" holding period of two to three minutes
"Typical" number of roundtrips per day: twenty
You have to be quick manually and make quick decisions
Hotkeys are huge, without them like bringing knife to gunfight
Has price levels pre-entered (limit orders, I guess)
Always uses limit orders, never market orders
Gets up at 6AM (Pacific time)
Looks for low float, low priced stocks gapping up biggest, "top gapper," large volume
Started with one minute bars but switched to three minute bars
ThinkOrSwim had three minute time intervals as default
The "tape" is main thing he uses to make trades, hard to explain
Spotting "Iceberg" orders ... "bid prop" and "refreshing seller"
Record your screen: Level 2 and Time and Sales and the Chart and re-watch in slow motion
VWAP gained prominence in recent years (2013 2014)
Over / Under VWAP ...
Need to be mentally stable and confident to trade
Meditates and tries to enjoy life to clear his mind
If you have addictive personality, self-control or anger issues -- they will come out in trading
Don't trade during low volume hours, just walk away
Identify if you have an addictive personality
Give back to the community
Comes from very humble beginnings, never been interviewed before
www.madazmoney.com
Twitter: @madaznfootballr

Notes for Chat with Traders, Episode 125

Added on May 22, 2017 by C. Maoxian.

I just discovered this podcast called "Chat with Traders." It looks really interesting and I plan to listen to them all (in reverse order) and share my notes for each one.

Episode 125 -- Matthew Hoyle (58:35)

Dutch?
Born in 1984?
Head hunter
Formerly an options market maker, in Amsterdam
On trading floor for six years
Started at age 13? Is that possible?
Exchange went electronic 2003
Didn't go to university despite opportunity to go to the best (in Holland?)
Went into head hunting in 2003
Makes more money as a head hunter than he did as a trader
Paid seven figures as a trader
"Executive search" is the high end, "experienced hires"
Recruitment is volume-based
Relationship-based business
Doesn't hire for "arcades" (where people bring their own money)
If a head hunter calls you, listen, don't just hang up
People (traders) like to talk about what they're good at
"Manual" trading firms disappearing, everything is automated now
Don't apply for stuff that you're not qualified for
Most firms want to hire fresh grads, *not* experienced people
Mental arithmetic tests used as stress tests
Technology + trading is the key combo ... must be able to program
Don't bother learning Java now, must know scripting languages
Old point and click traders hire coders to automate what they know
Paul Rotter, a classic point and click trader, "The Flipper," retired now
Whole industry is automating, all algo traders now
Experienced manual traders making a bit less money every year now
Strict division in some firms between tech side and trading side
Shortage of C++ programmers so severe they'll take any age
PDT, Renaissance Tech ... they want academics, will take old guys
Perks are nice, but retaining people all about compensation
Formula-based percentage of trading profits
RenTech has zero turnover ... extremely highly paid people
Discretionary bonus models; team-based structure, profit distribution
Pit traders in Chicago haven't vanished entirely, just much smaller numbers
Prop trading within banks did completely disappear for awhile
Hiring is based on volumes first and volatility second
Virtu has only 150 employees worldwide
Volatility high means traders hired, volatility low means tech guys hired (fight latency wars)
Volatility and volumes both low, layoffs hit hard (hedge funds, prop trading)
Banks not as nimble as hedge funds, way overstaffed, full of dead wood
AI is going to be big, lots of demand for people who understand it
A trader with one strategy, a one-trick pony, will never be hired
You have to be passionate in the interview, don't be negative
People will hire you because they think you'll make them money, it's obvious
Do mock interviews! Practice makes perfect. Use Glassdoor to get the questions
"Thank you for inviting me."
www.matthewhoyle.com
Twitter: @MatthewHoyle

Keepin' It Flirty

Added on May 19, 2017 by C. Maoxian.

Still on a Rachael Price and her Giant Mouth kick ... silly silly song, but I love it. God she's good. And the band is growing on me too.

http://wfuv.org * Follow @wfuv: http://ow.ly/flLAg Lake Street Dive performs "Side Pony" live in Studio A. Recorded 1/27/2016. Host: Carmel Holt Audio: Caroline Inzucchi Cameras: Sabrina Sitton, Nick D'Agostino, Kristen Riffert, Joe Riccobene & Emma Carey Editor: Sabrina Sitton & Nick D'Agostino

One Disaster and One Near Disaster

Added on May 18, 2017 by C. Maoxian.

THIS POST HAS MULTIPLE UPDATES SO SCROLL ALL THE WAY DOWN

The day trader I wrote about earlier has had some bad luck of late. Study these two charts closely to learn from his mistakes. APHB CETX

Update: Another near disaster on May 18th ... can you spot what he's doing wrong? GLYC

UPDATE: June 1, 2017 ... MBOT

UPDATE: June 8, 2017 ... ABIL

July 18, 2017 in CAPR

December 4, 2017 ... PXS and ASTC ... same old story, gets stuck in a Flying Pig, doesn't exit for a "small" ten or twenty thousand dollar loss ... I assume he adds to the losing position in an attempt to improve his average (475,898 shares traded in total), but price keeps rising (high in PXS was $12.22!) ... says he was down 98K, made some back when PXS finally broke at 2:45 PM. ASTC same thing, just less dramatic (smaller size probably and smaller move).

December 22, 2017 ... short SGLB ... $39K loss ... nearly half a million shares traded.

December 26, 2017 ... when the "halt resume" washout long fails, this time in FTFT ... ~$44K loss ... over 600,000 shares traded.

Jan. 4, 2018 ... CNET and CPAH ... nearly a million shares traded.

Jan. 5, 2018 ~$58,000 loss, long $CNET ... over half a million shares traded ... fighting it on the other side after a bad loss previous day. Clearly "day after" revenge trading ... ugly but happens to the best of us....

Jan. 9, 2018 $FORD ... this one no doubt caught a lot of Pigs Players off guard ... then why they tried to reverse long after the squeeze to $4, smackdown:

May 7, 2018 ... BLNK a runaway, trapped short, tried to average down down down, just gets more and more stuck, pulls the plug at the top:

May 8, 2018 ... Another large loss, this time from the long side. I assume he did his "halt resume" play here with insane size and it instantly "dumped" on him to the tune of 60-80 cents ... but it's just a guess.

May 11, 2018 ... -27K, wrong side of another runner, HEAR, apparently with "half size," which is fortunate... otherwise the loss would be twice as large.

New one for June 18, 2020 … short UONE with a realized loss of $244,833. Must have averaged down, taken the loss. Tried again though with twice as much size (martingale method), lost again. Tried once more with twice as much size again, lost again. Stopped trading (or the market closed). That’s my guess:

July 20, 2020 … no details again but over a million shares traded so I assume some kind of martingaling occurred … realized loss of $166,000.

July 22, 2020 … 315,000 loss the bulk of it in $MXC … what’s happening is that TheShortBear is posting huge wins every week and I believe Madaz is trying to compete, taking larger than normal risks in an attempt to keep up. He should be aware of this and try to get things back into check.

September 21, 2020 … says intraday loss over $500,000 … he’s taking 10,000 share positions in Tesla, it seems … his competitive zeal to “keep up” with TheShortBear may be making him take unusual risks?

October 9, 2020 … a new record loss, $995,000 in VVPR … got him coming and going it looks like. Pretty vicious jam above the opening range high … then “switching bias” resulted in getting “dumped on.” Possibly while martingaling bet size the entire time.

ETF Trading Portfolio Update -- May 15, 2017

Added on May 14, 2017 by C. Maoxian.

No changes this week.

Funny Not To Care

Added on May 13, 2017 by C. Maoxian.

This lead singer is really good, love her voice, close your eyes so it's not marred by her white girl dancing .. she deserves a better backing band than these hipsters.

Lake Street Dive live at McCabe's 8-28-11. video & audio by Wayne Griffith.

Dissecting a Madaz Play

Added on May 12, 2017 by C. Maoxian.

Madaz shorted $TCCO this morning and I wanted to dissect the trade.

First, we know he was watching $TCCO because it was the number one Up Gapper:

At 9:39 AM he tweeted that he had "nailed" it for $5,200 having shorted "4ish average" and covering $3.50.

Now let's look at a micro timeframe chart here, 10 second bars ... that should read "pre-open high $3.70" not "high $3.70."

Later at 9:54 AM he tweeted that he covered his final 2,000 shares at $3.20 bringing the total gain to $5,800 ... $3.20 is 30 cents below $3.50, times 2,000 shares is $600 additional, that makes sense, I guess.

Here's the chart again with the $3.20 level marked.

Finally, he tweets his P&L, which he does every day, win or lose.

What's revealed in the P&L is that he realized $5,942.85 by shorting $TCCO, generating 10 tickets and trading 66,096 shares. I'm not sure if the shares and tickets numbers mean he bought and sold 33,048 shares or bought and sold 66,096 shares, or 5 buys 5 sales, 8 buys 2 sales, 9 buys 1 sale, etc.? Maybe some kind reader can enlighten me via email (or Twitter).

Let's assume that he bought 33,048 shares and sold 33,048 shares to make the $5,942.85. That's almost exactly 18 cents a share. So we have to assume that he is averaging into the position and averaging out of it, and was able to walk away with 18 cents of profit.

If he simply shorted 33,000 shares at $4 and covered 33,000 shares at $3.50, he would be making over $15,000 on the trade, not $6,000. I'm not sure how much of a difference the final 2,000 shares covered at $3.20 can make.

I'm just thinking aloud here, I'm trying to make sense of this.

A bigger question is *why* did he begin shorting where he did to build a 30,000 share position with a 4ish cost basis? Was he "reading the tape" and built the short based on that? This thing traded up to $4.40 ... if he were short 30,000 shares from 4 and it ran on him, would he get out at $4.40? How much slippage would he suffer? Was he willing to risk $12,000 to make $6,000?

I'm just thinking out loud here, trying to make sense of this. I'll update the post as I continue to think about it, and incorporate any other wise people's thoughts, with credit of course!

Two readers have written in with their comments, both full-time traders with many years of experience:

“As to his trading TCCO today your guess is good as mine as to how those 60k+ shares were distributed within the 10 tickets you mention. What I find odd here is that based on his strategy as explained in his various YouTube videos, he doesn’t short unless price is at or below VWAP and below pre-market highs. Maybe he has some nuances to his strategy that I am not aware of, but this particular TCCO trade is opposite of how he “normally” trades short. If he goes long its almost a reverse mirror image of this TCCO short trade. I believe most of his trades are cleared through ETC.

Based upon one of his recent tweets about getting enough rebates to cover commisions, I am led to believe he probably hits bid/ask for entry/exits about half the time, otherwise why “advertise” you covered your commissions with rebates.

From my viewpoint, if his trades are real, he is scaling in and out hiding share size but what is sketchy to me, based upon experience, is that he is able to move 5k-30k lots without moving price dramatically and getting full fills. The volume in the majority of the low floaters he trades in my opinion can’t absorb the share size he is using and getting filled without adversely moving price. I trade them from time to time but the only way I can get multiple thousand lot fills is to piece it out hiding shares at various price levels and even then I end up not getting full fills and have to cross the book and hit bid/ask to close position.”

“First off, it’s 33,000 in and 33,000 out for his total shares. And yes, his risk to reward is completely skewed. I’m not a fan of how he trades. If he got short on this around 4 and especially because of the super low float he could have just bid whacked 10,000 share blocks and knocked the price down himself easily.

There was no reason to cover where he did. He claims to use the three minute chart and if you take a look at it there was no reason to only get such a small piece of that move. I really think the only reason why and how he has made money is because of the sheer size of his positions.

An answer to your question of why he would short there is because we are familiar with the name and also super low floats. You get to know these things over time and this is textbook: it hit half dollar resistance and pulled, and once these pull it’s over and can be pretty safely shorted.

Especially if you look at that last green candle and how big it is on the three minute chart. It’s going parabolic and that’s a dead giveaway that it will pull back. These stocks are a completely different world, but once you get to know them, they are highly predictable. He does know his set ups, but I really think he gets scared out of his trades because he is using too much size. He would be way more profitable if he sized down even a little bit.”

He Grabbed His Pants, Took A Better Stance

Added on May 11, 2017 by C. Maoxian.

Here's the silver-tongued Sammy Davis, Jr. in an amazingly tight brown pantsuit singing Jerry Jeff's great song:

This is Sammy Davis Jr.'s Version of "Mr. Bojangles".

Trailing a Stop in LBTYK

Added on May 8, 2017 by C. Maoxian.

I sent out this short set-up in $LBTYK for April 27 to everyone who signed up for my free Daily Trading Idea ... sign up now if you haven't already done so.

Here's the image I sent in the email ... I checked my records and I did short $35.10 at 2017-04-27, 12:09:35 on ISLAND, no doubt by accident after transposing the numbers ... I do this at least ten times a day, make trading mistakes I mean ... confidence-inspiring, I know).

Seven days later it looks like this:

So the question is what do you do when it gaps below the target? I'm going to cover half tomorrow morning and trail the stop above today's high of $32.54. I can see this thing going down to $29 or even $26, but I want to take half off the table now. If you have any better ideas, I'm eager to hear them (on Twitter or via email), and I will share them in turn!

Initial risk was 44 cents and the target was over $2 away so the risk/reward was 1:5, and if I cover near where it closed it will be closer to 1:10 ... a "ten bagger."

UPDATE: @DavidTaggart suggested moving the stop to the high of two days before every time it makes a new low. @Contrahour suggested an Average True Range based stop, which is a little more complicated, so I'll go David's high of two days ago for now.

ETF Trading Portfolio Update -- May 8, 2017

Added on May 7, 2017 by C. Maoxian.

DZZ reversed, but remember that I'm going to switch the GLL once it too reverses. There was bizarre action on April 24 in DZZ which has thrown off the trend following system -- another reason to drop that ticker and track GLL instead.

Make a Paper Boat, Light It, and Send It Out

Added on May 2, 2017 by C. Maoxian.

Mink's bassist sings the Spanish portion ... I always wondered about that.

I also like to say to the rats in the locker room, "Hey Mr. Gym, I can see the shape you're in..."

Willy DeVille (August 25, 1950 -- August 6, 2009) was an American singer and songwriter. During his thirty-five year career, first with his band Mink DeVille (1974--1986) and later on his own, Deville created original songs rooted in traditional American musical styles.

Sites to Worship Heavenly Bodies

Added on May 2, 2017 by C. Maoxian.

I read Ian Johnson's piece, My Beijing: The Sacred City, with interest since I too first lived in Beijing as a student (in 1991) and then spent ten years there (between 2005 and 2015).

Some excerpts with my comments:

"I studied Chinese language and literature at Peking University from 1984 to 1985 and biked over to [the Ritan park] area because it had become the country’s chief diplomatic district and one of the few places where homesick Westerners could buy chocolate and postcards."

Nutella. That's what we bought (and hoarded) in 1991 ... only available at the Friendship Store.

"I came for the croissants, but stayed for the tree-lined streets and the Temple of the Sun."

My son went to school at Fangcaodi, which was originally set up for diplomats' kids. When we would ride the electric scooter through that tree-lined area every morning, I'd tell him, "there are no other streets like this in all of Beijing."

"I ended up moving into one of the diplomatic compounds and the neighborhood became my home."

He doesn't say what the rent was in 1994, or how it changed over the seven years he lived there. I'm sure today it's thousands of dollars a month, even for a small place.

"This was a time when Chinese parks rarely had grass. Instead, the hard-packed dry earth of arid Beijing was raked by crews every few days. It was odd but had an austere beauty that set off the ginkgo and persimmon trees that lined the paths."

Parks in Beijing still have no grass and there's nothing beautiful about that hard-packed dry earth ... Johnson is clearly a glass-half-full kind of guy. To get that one photo with green grass in it that accompanies the article must have been a real trick shot.

"But this need for green space clashes with another trend in China: the surrender of public areas to the rich."

This is true. I used to visit Longtan Park, which was near our apartment, and goons with earpieces used to chase me out of areas that had been "privatized." It really got my dander up, but there was no way to fight back, 没办法.

"[There are] high-end restaurants, an exclusive social club, a German beer garden, a yoga yard, a strange antique furniture store ... commercial activities that don’t belong in this great old park"

These "money-spinners" have been there for ages and they're on the periphery; I saw no harm.

"I even listen for the screech of the tacky children’s amusement park with its half-broken choo-choo trains."

Those "tacky" amusement parks, with their derelict rides, which can be found in all these sacred parks, were some of my favorite places ... and my kids spent many hours in them (at 30 cents a ride).

"But over the past decade or so, Chinese have been searching for meaning in their lives."

Now that they can afford to, lol.

"The admission fee of $6.50 [to the Daoist Temple] does keep out many people...."

45 kuai is a pretty high bar, it would keep me out for sure.

"Beijing is still the capital of an authoritarian state. Beijing’s message is still the state’s message, perhaps not perfectly but still audibly."

True. But old Beijingers are a pretty rowdy bunch and are quick to tell you what they *really* think, if you're a foreigner who speaks Chinese, like Johnson does.

A Little Piece of Tail

Added on April 30, 2017 by C. Maoxian.

The great Albert King ... Drowning on Dry Land ... words of wisdom for young men.

'Years Gone By' - [May, 1969]

Dirty Dozen, Long Only Portfolio, End of April 2017

Added on April 29, 2017 by C. Maoxian.

I introduced the Dirty Dozen portfolio earlier this month. I track a dozen popular stocks using a *monthly* trend following system. It might be interesting to know my take on these stocks if you hold any of them. I did settle on Chipotle as the twelfth stock, which readers overwhelmingly nominated.

Amazon
Amgen
Apple
Chipotle
Facebook
Gilead
Google
Netflix
NVIDIA
Starbucks
Tesla
Twitter

There are no changes this month, but NVIDIA is at an interesting point ... it's the second longest-held position and the biggest winner ... it will be telling when the monthly trend finally turns down.