Filtering by Tag: CwT

Notes for Chat with Traders, Episode 171

Added on by C. Maoxian.

Episode 171 -- Stan Gluzman (77:46)

  • Doesn't trade the close anymore

  • The close used to be his go-to time, but not anymore

  • Doesn't hold overnight

  • Biggest position on by 9:45 AM, trades around core until 11 AM, usually flat by noon

  • Things are mispriced in the morning, but fairly priced by noon

  • Forgets tickers shortly after he's done trading them

  • Aaron mentions Stan's CLRO trade from morning of recording

  • Looks at VWAP

  • Tries to short near top, covers half on washout, re-shorts the next pop, covers wash, etc.

  • All chat rooms watch the same stock, pump it multiple times throughout the day

  • Trading full-time 4.5 years, another 1.5 years part-time before then while in college

  • Started in 2013 when in college, made 30% on a $5 stock in two days, "bitten by the bug"

  • Started studying trading on his own while still in college, joined chat rooms, bought DVDs

  • Locked himself in his room and "started blowing up accounts" in 2014

  • Realized he needed to be surrounded by professionals, joined prop firm in 2015

  • Was a breakeven trader when he joined the prop firm, before accounting for commissions

  • Undercapitalized, so commissions made him a net loser despite breaking even on trades

  • At prop firm he first learned how to scalp for half a penny trading millions of shares

  • Read on a forum that a good prop firm doesn't take your money, no capital contribution

  • Seven Points Capital office right next to his college

  • Seven Points doesn't require capital contribution, charges no commissions

  • Seven Points wanted people who were teachable and passionate about trading

  • Advantage of being prop trader versus retail trader: "like working out in a high-end gym with a personal trainer versus working out in your backyard with buckets of water"

  • In prop you're trading other people's money, not your own, so no psychological pressure

  • Routes are important, has access to ten dark pools, six aggregators, plus all the exchanges

  • Have to figure out how to jump the queue by figuring out which dark pool is actually buying or selling

  • Has 150 (?!?) hot keys set up

  • Most used hot key, "F2" short the bid [I laughed]

  • Uses scroll wheel to select position size

  • Mike Katz was his first real mentor

  • Mike Katz always keeps his eyes open, in the right places at the right times, on his toes

  • Red two days in a row? Try to figure out the error

  • When losing money, he sizes down, divides his daily lockout dollar loss by four

  • Got his first paycheck five months in at Seven Points Capital, been sizing up ever since

  • 2015 his first full profitable year

  • In 2016 he traded 260,000,000 shares, more than a million shares a day scalping [no commissions key?]

  • First time he lost $1,000 was a shock, but as he sized up, it became a regular sized hit, no longer hurt

  • In 2016 he would take advantage of inefficient algorithms, "short the offer, cover the mid"

  • In 2016, Sprint (S), Sirius (SIRI), Ford (F) were ticker symbols he'd trade: high volume, small range

  • Short the offer, saw offer was about to lift, would cover the offer or cover at the bid once it flipped up

  • 96% success rate doing the kind of scalping, but that was 2016, can't do this anymore

  • Can gauge "Book Pressure" by watching the tape

  • Algos didn't care about book pressure, it would just execute at some regular interval

  • Could spot the algo because the same price and quantity was printing at a regular interval

  • Midpoint is price between bid and offer, there is "invisible" liquidity there, "peg to midpoint"

  • BYX is his preferred route for the midpoint

  • "Can't get the bid, go for the mid"

  • Crappy little penny stocks are volatile and retail-driven, small order sizes, not scalpable with size

  • Switched from scalping stocks like Sprint to scalping SSR (short sale restriction) stocks

  • Using his superior routing skills, he could short SSR stocks at the mid as they fell

  • Most people are at the offer or the bid, they don't even know about the mid

  • Gives example from his SSR trading that day: one gain was five cents, other gain was 35 cents -- "scalpy"

  • SSR strategy just a tool in his toolbox now, the edge has sort of disappeared

  • Small-cap stocks gap up and fail, a "fader" [no mention of locate fees, alas]

  • Small caps are volatile, full of dumb money: newbies plus true believers

  • Also trades big cap stocks on earnings days

  • Small cap stocks gap up for a lot of reasons, usually a press release

  • Uses gap scanner, filters by float and market cap, less than 100 million share float, usually under 20 million

  • Uses multiple entries and multiple exits ... this is the secret to his success

  • Takes 1/4 position at point he thinks is the top, if wrong he just loses 1/4; if he's right, he adds as it falls

  • Scalps half his position and holds half for the all day fade

  • If he thinks he's right, and a big bid appears, he'll smash the bid

  • You'll never pick the top or the bottom, you always have to scale in and out

  • Give yourself room to be right

  • If stock drops sharply, will take off a quarter, drops sharply again, will take off another quarter

  • After every sharp drop he covers, then re-shorts the bounce if it happens

  • Has a set risk amount on every trade that he's willing to lose

  • When he doesn't follow that set risk amount, "gets stubborn," he takes his biggest losses

  • "Do you want to make money, or do you want to be right?"

  • Tracks performance of his setups: size of float, size of gap, time of topping out, pre-market volume, etc.

  • Has created "money box" ranges where he expects stocks to top out or bottom out

  • Visualizes the "money box" on his charts

  • Learned how to code to create the "money box" visual indicator on his charts

  • Stocks that continue to squeeze up are outliers

  • Tries to line up fundamental reasons, tape reading, basic technical analysis, on every position

  • Learned about volume forecasting from AllDayFaders

  • Idea is to forecast volume to predict if price will fade or squeeze during the day

  • Unusual demand leads to squeezes

  • Stan doesn't want to get a job, so he trades for a living [chuckling]

  • June 2018 he had a red month, it was rough, he pulled a lot of all-nighters

  • Learned a ton from JTrader, who helped him get through June slump

  • Mike Mangieri encouraged him, had his back despite the losses

  • NYC is expensive and the weather isn't great, so he left for Florida (also taxes too high in NY)

  • Set up Ft. Lauderdale office with Krishna Joshi

  • Has three other traders on the desk in Ft. Lauderdale, plus one studying for his license

  • New traders shadow him for a couple of weeks, can figure things out more quickly that way

  • Records his screen every day, posts it to group intranet so colleagues can study

  • Eliminate mistakes, don't repeat the same mistakes

  • Being fearful when entering a trade is a mistake to be worked on

  • Sized up in 2018 and wasn't as consistent as 2017

  • Goal for 2019 is to find balance between taking full-size positions and not shooting for home runs (holding too long)

  • Added many new setups to his toolbox in 2018

  • "If the market changes, I will adapt."

  • Twitter: @ciocanatrader

Notes for Chat with Traders, Episode 168

Added on by C. Maoxian.

Episode 168 ... Anand Sanghvi ... "Sang Lucci" (95:20)

  • Prop trading model doesn't make sense any more, commissions too low

  • Prop trading firms now sell education

  • Prop firms take the other side of their own (poor) traders' trades

  • Recently moved to Puerto Rico

  • Live there 183 days and get serious tax breaks

  • No federal income tax, no capital gains tax in Puerto Rico [really??]

  • Sales tax in Puerto Rico is 11.5%

  • Island living very expensive though... everything is imported

  • Ton of crypto guys in Puerto Rico, waiting to take gains tax-free [gains?]

  • Crypto guys are now all "distraught"

  • Electing to mark-to-market is important if you're an active trader

  • Trading under a business entity, you can deduct a lot of things

  • Pay the $500 to set up an LLC if you are seriously active

  • Had a hedge fund, had a couple of bad months, biggest investor pulled out, shut it down

  • 95% long options strategy in the past

  • Looking to set up a new hedge fund in Puerto Rico, with less risky strategy, more automation

  • Trading strategy has changed completely in the last three years

  • Now he's 60% short options, 40% long options

  • Knows immediately if he's wrong when there's momentum

  • No momentum then you are in la-la land, no idea if you're right or wrong

  • Theta -- time component to options pricing

  • Trades NFLX, AMZN, NVDA (etc.) options

  • Used to be up a million in a month, then down 500K the next month, returns were too volatile

  • Holds things for one, two, three days max

  • Has traded options on the same stocks, the Usual Suspects, since 2010

  • AAPL options are so thick you can put 250K position on and take it off in minutes

  • You need portfolio margin to get more creative

  • Right now he's swing long TSLA ... long March 2019 400 strike calls

  • Sells short-dated TSLA calls against his core position to collect income

  • Follows his instincts ... has been trading for over a decade

  • If your trades are too short-term, you're going to get shaken out

  • There's a fine line between following your instincts and being stubborn

  • Instinct tells you to get out, but you're too stubborn to get out

  • Where are you trying to go with your $5,000 account?

  • Hedging allows you to stay alive until volatility returns

  • Find what strategy works for you and when it works for you

  • BTFD "buy the dip" worked for six years in a row

  • Trying to make your losses back -- that's how people go to zero

  • Your instinct will try to save you but you'll be stubborn and ignore it

  • Find ways to hedge your life and who you are as a person -- guard against depression

  • Figure out how to protect yourself from yourself

  • If you hold options till expiration, "the shit's going to zero"

  • There's a fine line between conviction and recklessness

  • If you're too attached to a position, you won't be able to cut it

  • After 2007, high frequency trading changed everything

  • All markets are emotional ... all auction markets are the same

  • Retail traders can't make any money because they're too emotional

  • Retail traders know they suck but they have no solution

  • With automation, you're only as good as your code

  • [He sounds like a profane Jim Cramer, not just the voice, but the pacing ... it's fascinating]

  • Interesting idea about using facial recognition technology to save you from yourself

  • You have an app on your phone that saves you from yourself

  • [Segment from 1:16:50 to 1:17:20 made me fall off chair laughing … “your daughter’s mother”]

  • Script stops you from trading the same ticker repeatedly within X amount of time

  • You need to create a behavioral profile of yourself as a trader, like Facebook has of you as a human

  • Multi-level marketing thrives in places where people have no opportunity and they're ignorant

  • Most people can't stick it out until they make it trading, it's too difficult, they quit (and who can blame them?)

  • Website: www.sanglucci.com

  • Twitter: @sanglucci

Notes for Chat with Traders, Episode 87

Added on by C. Maoxian.

Episode 87 ... Tom Sosnoff (60:58)

  • Aaron recommends Sosnoff’s Ted Talk

  • Caddying 18 holes is called a "loop"

  • Jimmy Rocko, his caddy master, grifted him out of all his earnings, cheap life lesson

  • Current generation way too risk averse

  • Current generation has too much student debt, makes them scared

  • Take risks when you're young ... it's common sense

  • Risks usually aren't efficiently priced

  • Graduated college in summer of 1979

  • Wanted to work for a lobbyist but couldn't find job

  • Worked for Drexel Burnham right out of college, fall of 1979

  • "Bullshitted his way" in

  • Pre-Milken, he was long gone before the collapse of Drexel

  • Gold and silver exploding then

  • Stepped on floor of CBOE and knew that's where he belonged

  • National Semiconductor (NSM) pit, first words to him: "f-ck you!"

  • Trading floors: all alpha males, strong egos, independent, grifters -- fit his personality

  • Spent 20 years on the floor of CBOE

  • 3-5% of the people they hired made it

  • He just got lucky and made it

  • Only instruction to trainees was "go make some money"

  • Couldn't outsmart anyone so tried to outwork them

  • Made enough money so he could build ThinkOrSwim

  • The only way to make money with options: trade small, manage profits, sell options naked

  • All about creating a statistical chance of success with options

  • No such thing as a quantitative model that can beat the markets

  • Market making models (and HFT) can beat the market, but that's it

  • The world prices everything perfectly -- no free money, no edge out there

  • Derivatives overprice for fear, take advantage of this opportunity

  • Sell high implied volatility

  • There are people who make money, but they're outliers

  • Can't steal money from your customers anymore, this is how people used to make money

  • Be product and strategy agnostic, all your focus is on liquidity

  • Manage your winners, forget about your losers

  • Learn all about implied volatility, learn how to sell premium

  • Price is not mean reverting, but implied volatility is

  • He's on pace to do 10,000 trades for the year (2016)

  • Start young and start small and learn

  • If you can order a pizza, you can trade. It's not rocket science

  • 100,000+ tastytraders [not sure what this means? active viewers?]

  • Markets 35 years ago were inefficient

  • Individual investors today at no disadvantage to professionals -- fees, technology the same, only know-how different

  • Trading psychology is 100% bullshit

  • We make people feel good about their lack of know-how

  • People aren't successful because they don't take the time and the commitment to be successful

  • Industry makes money by managing other people's money

  • There's no psychological element to blackjack or even poker (it's all mechanics, playing by the book)

  • He stood in the same two foot spot for twenty years in the pit

  • Saw the hurricane coming and wanted to be the first one out

  • Scott Sheridan his partner ... hired great technologists to build ThinkOrSwim

  • Hired smart people to execute their vision

  • He didn't see his family for ten years while building ThinkOrSwim

  • Built a great company and product

  • Didn't want to sell ThinkOrSwim, but it was a public company and TD bought them out

  • Sold ThinkOrSwim for $750MM

  • Went to CEO of TD Ameritrade and told him he wanted to leave

  • Built tastytrade, which is a media company, profitable since Day One

  • In order to trade for a living: you need capital and need to know what you're doing, stay small

  • His biggest revelation was that he was trading too large ... got smaller, got successful

  • Eight hours a day of live content on his website every day, tens of thousands of hours archived

  • Website: www.tastytrade.com

Notes for Chat with Traders, Episode 164

Added on by C. Maoxian.

Episode 164 ... Nick Fabrio (84:10)

  • Wanted to be a doctor
  • Started working at a casino, 4 AM to midday
  • Working in a casino is depressing, everyone's losing
  • Sold cars after that, was pretty good at that, lasted a year
  • Started frozen yoghurt shop, hard work, paid off debts, sold out, 23 yo then
  • Retail is horrible, too much competition, frozen yoghurt is "optional" [discretionary spending]
  • Doesn't regret yoghurt experience, learned a lot 
  • Got job at something called Wholesale Investor. Boutique broker. Not high pressure sales
  • Willing to take a risk, it's in his nature
  • "Bryce" turned him onto trading, back in 2010, 2011 [Bryce Edwards]
  • Learned a lot of from Bryce and others in chat room he was in 
  • Replaying stuff on Spark? [no idea what that is ... it's this]
  • Did year abroad studying in US
  • Started with $10,000. Lost $300 in first month, second month made $800
  • Added $10,000 more in second month once confident
  • Built account up to $65,000 within five to six months (January 2016)
  • Only traded stocks between 30 cents and $3
  • One tick is a full cent over $2, half a cent under $2, and then lower from there
  • Would risk $50 a tick on his highly confident trades, $25 a tick on less confident ones
  • Scalping when he began
  • Watches market all day long even though he is in trades briefly
  • Only focused on one setup at first
  • Always been fearless about losing money, unlike most people
  • Been trading full time now just under three years
  • 2016 on exchange to US, didn't trade as much
  • Scalper trading off catalysts, news
  • More comfortable short than long
  • Average holding time is ten to twenty minutes
  • Wishes he could hold for at least an hour
  • He's holding when he should scalp, and scalping when he should hold, working on this
  • Comes in each day with a watchlist, filters through looking for candidates
  • 40 stocks on his watchlist at the open, many charts open on Spark 
  • ASX opens by alphabetical group, two minutes apart [odd]
  • Earnings news, contract wins ... these are good catalysts
  • From 7 AM to 4:10 PM he's in front of the market
  • Received a cease and desist letter from GetSwift(?) after posting four page report on Twitter
  • 20 cent IPO went to $4.50 and now it's back at 35 cents
  • "Rubbed him up the wrong way"
  • Took his information to the AFR [whatever that is ... it's this]
  • In a thick book, he'll risk $500-$1000 a tick
  • Peruses the AFR [whatever that is ... see above]
  • Learned about Daily Report Card from Austin Mitchum
  • Internalize what you're doing right and what you're doing wrong
  • Trying to grade his setups in the moment now
  • Sizes by tick value and liquidity, how much protection he has in the book
  • Fair bit of spoofing in Australian market, algo activity, bid propping common
  • Recent Cobalt Blue Holdings trade was an A+ short for him
  • Illiquid stock, so good opportunity for a move, took a large sized trade
  • Got out within 20 to 30 minutes, but should have held longer
  • He is critical of himself, always room for improvement, a bit of a perfectionist
  • Does all his trades manually
  • Only uses mental stops, something else he has to work on
  • Does everything off the cuff, all feel based
  • If something goes against him, he gets out
  • If a trade does not work right away for him, he'll get out
  • Scratches lots of trades
  • Gets in and out in one go
  • He's an adrenalin junkie, if position not large enough, he loses interest
  • 70-80% of his profits happen in the first 30 minutes to an hour
  • Trades Australian market from Texas
  • Mean reversion "wallet padder" trades, "income" trades
  • Recently crossed $1MM in trading profits mark... after two and a half years
  • Has financial freedom but doesn't really care about the money, doesn't spend it
  • Bryce's mentorship was key, learning curve greatly reduced
  • "Nick is a freak" ... trading a game that suits his personality
  • Strengths: cutting losers quickly, "learn to lose," unaffected by losses, doesn't fight losers
  • Weaknesses: shorts too much, looks for reasons to short with obvious buys, doesn't relax enough
  • Plays reversals to VWAP
  • Not really a charting guy, more of an order book guy
  • Internet failures really "grind his gears"
  • Has no dollar loss limit for the day, he just grinds back
  • Lazy about doing daily report card now
  • Advice for amateurs: having a mentor is key, focus on doing one thing and doing it well, size up
  • People who aren't passionate aren't going to make it, you have to live and breathe it
  • Trading isn't a path to freedom, it's a path to prison (in front of the screens) [I'm chuckling]
  • Trading isn't stimulating or interesting to many people, yet they still try to trade and wonder why they fail
  • Trading isn't a job, it's just enjoyable
  • Don't over-plan starting, just dive in, immerse yourself
  • Let the smart people do the algos [or people who think they're smart; Nick is clearly smart :-)]
  • Paper trading is the worst thing you can do
  • Risk $1 a tick at first, don't even cover commissions, but *never* paper trade
  • Read Bella's books, they're awesome
  • Trading is like poker ... 95% psychology, 5% skill
  • Trying harder to hold longer ... at least an hour
  • Twitter: @longhorncapital

Notes for Chat with Traders, Episode 95

Added on by C. Maoxian.

Episode 95 ... "Adrian" (70:28)

  • British? Accent hard to understand
  • "My missus works away from home"
  • Professional sailer for 18 years, lots of races
  • Fishermen as "opportunistic pirates"
  • Early 40s, what do old sailers do?
  • Bought systems off internet, paid for poor quality trading courses
  • Found the common link among profitable traders was their approach to the business
  • Wasn't making progress trading while doing a side job, realized he needed to focus full-time
  • Wife supported him when he went full time to learn how to trade
  • Took 18 months after that to get profitable
  • Couldn't make a living since he was undercapitalized
  • Wife believed in him and he believed in himself
  • Have to go down the dead-ends to realize they're dead-ends, not avoidable
  • Tracked his trades very closely
  • Found he had random trades that gave him random stats
  • Found he had large number of errors that if eliminated would hugely improve results
  • Found if he followed his rules and eliminated errors, he would be slightly profitable
  • Now uses Volume Profile to take trades
  • Trades German bund primarily, secondary market in DAX, used to trade Eurostoxx but stopped
  • Intraday trader: big picture: hourly, intermediate picture: 15 mins, executes off of 3 min chart
  • Didn't have enough capital to trade off the daily charts
  • Discovered that no pros traded forex, all retail pikers there; pros all traded ES or Bunds, etc.
  • Keeps a lot of stats on the markets he trades
  • Discretionary trader, couldn't code his system up
  • Has a checklist before he takes a trade
  • Always risks approximately the same amount of money in each trade
  • Uses Volume Profile to place his stops
  • Knows stats on things like "gap fill" or tests of Point of Control (POC) ... what percentage of the time is the gap filled or POC tested?
  • How far "offside" does price go before the gap is filled? He tracks these stats
  • Uses Linnsoft's platform InvestorRT and their language to keep the stats
  • Starts looking at weekly charts, marks levels, does same with daily, determines bias
  • Then looks at hourlies, judges trend, marks levels, places where price will test
  • Does same with 15 minute charts
  • Is it trending or in balance? (volume profile language)
  • Always looking at levels where he expects it to test
  • Key thing is being honest with yourself when you do your trade reviews
  • People don't like to admit that they "made a tit of it"
  • Marks his charts end of day where he entered and exited, things he missed
  • On weekend he reviews all the daily charts from the past week
  • Grades all his trades and grades all of his days ... then reviews them
  • "Why did I do shit?" ... fear of loss and fear of missing out are the two big things
  • Score: Is it in my trade plan? Playing to win or not to lose? Was he patient, how he was feeling, all recorded
  • Also tracks his intuition, what did his gut say? Scores this too
  • Spends 20 hours outside of market hours reviewing his trades every week
  • The mental side goes hand in hand with your trading edge
  • Trading like any sport: you have to practice for hours, can't just jump into the ring and box
  • Preparation as important or more important than focusing during market hours
  • Website: takingonetradeatatime.com
  • Twitter: @adeyf69

Notes for Chat with Traders, Episode 162

Added on by C. Maoxian.

Episode 162 ... Mike Bellafiore (69:12)

  • Runs prop trading firm, SMB Capital, established 2005
  • Partner is Steve Spencer
  • Stages of becoming a trader: 
  • First stage: consistency; second stage: size; third: breadth; fourth [missed it]
  • Put your trades in TraderVue to measure your results
  • Foundation: Is it a good stock to be trading? Is there news?
  • Need passion for trading, and a really solid training foundation, and perseverance
  • Big winners at his firm all trade differently
  • You need to discover your niche by experimenting
  • Recommends reading Carol Dweck's book, Mindset
  • Period of historically low volatility hard for traders, no opportunities to make money
  • Had to develop trading strategies that make money in low volatility market
  • Then when volatility returns, be able to switch back to old methods
  • Have to be able to adapt when conditions change
  • Post your daily trading report card (consistency, sizing, etc.), not your daily P&L 
  • Austin somebody in Sydney is a great role model for a daily report card, follow on Twitter
  • Daily routine: did you sleep well, did you exercise, did you review your charts after the close?
  • Agrees with Blair Hull that all great things are created by teams, not individuals
  • Archive different trades: e.g., the breaking news trade (like MTCH on FB news day), tag it in TraderVue
  • Build your playbook, know the setups that you trade well
  • Joint venture with Kershner Trading Group, for some scanning technology?
  • Make $4000 a month consistently [cube farmer salary], then increase your size (dollar risk) little by little (up 20% a month)
  • Have $1000 of dollar risk per day, risk 20% on one trade ($200), self limited to five trades a day
  • Don't go from risking $1000 a trade to $5000 -- jump too great, get bigger gradually
  • Don't think about making a million dollars, think about making $1500 a month
  • First step in progress is to lose less, next step is to breakeven, then $1500 a month, then $4000, then $10000, etc.
  • Takes three years to start making money even if you have the best resources (technology, coaching, plenty of capital)
  • Keep plugging away, go from 20 yard line to 30 yard line
  • Twitter: @MikeBellafiore

Notes for Chat with Traders, Episode 70

Added on by C. Maoxian.

Episode 70 ... Jeff Davis (76:31)

  • Grew up in farm country two hours north of New York
  • [Sounds like a two pack a day smoker]
  • Didn't go to college
  • Worked for US postal service, in processing center, night shift
  • Voracious reader of magazines and newspapers at work
  • 30 years old then [late 1990s?], married, had baby and mortgage
  • Wanted to be his own boss, attracted to day trading
  • $25,000 minimum to join an LLC trading firm
  • 1999, Harbor Securities, firm blown up by one trader [not him]
  • Didn't matter since he'd pretty much lost all his money anyway
  • Saved more money, went to Bright Trading next
  • Passed series 7, sat on a desk in the city, surrounded by traders
  • Worked night shift at USPS, day traded during day, slept on train [wow]
  • Was breakeven at Bright
  • March 2000 he went full time [how about that timing?]
  • Learned how not to lose while at Bright
  • Learned how to short
  • At Bright, you picked one stock and specialized in it
  • Trade with the specialist, not against him
  • Most of his problems were mainly him
  • Made money in the morning, gave it back in the afternoon
  • Sep. 11, 2001 last day of trading at office at Bright (next to Towers)
  • Afterwards traded from home, lonely and hard but also good
  • Guys who focused made money, people who didn't adapt were gone
  • Got Lyme Disease, got sick, couldn't trade ... inspired him to automate
  • You can't fiddle along with trading, bad things happen in life so you have to seize opportunities
  • Exchanged his mentoring with a programmer who coded up a "tape reading tool"
  • In 2005, Russell re-balance provided a lot of opportunities, he saw this
  • His brother also a computer programmer, wrote a program to take advantage of index rebalancing
  • Found programmers who also traded, they understood what he wanted
  • Should have learned Fortran and Cobol in high school but didn't
  • In his early 50s now, wouldn't even think about learning how to program now
  • If you're in your 20s, definitely learn how to program, or find someone who can program for you
  • Avoid the rabbit holes
  • If you're searching for edge, you're definitely going to go down some rabbit holes (curve fitting, etc.)
  • Nobody has ever run a bad backtest
  • Trend following hard to do when you have a 30-40% win rate, people give up
  • Nothing out of the can is going to work for everybody [or anybody]
  • You have to work hardest on you .. your psychology
  • Your strategy has to fit your personality
  • He has now achieved "mature simplicity" ... it's not what you add, it's what you take away, less is more
  • Find something where you can get size on, where you're confident
  • You're in a risk business, you don't want to make a salaryman's wage
  • His algorithm is now trading the S&P futures
  • Mean reversion strategy -- most days are range days
  • Range prediction algorithm -- knows probability of daily range, will fade spikes
  • Yesterday's high or low is hit 88% of the time
  • VWAP is the target on most of his trades
  • When price gets away from VWAP, that's where he gets interested
  • Range is a well-kept secret (Cooper, Crabel, Raschke have done lots of work on it)
  • Be aware of "market regime" even though you're day trading
  • Everything he does is based on Average True Range
  • For example, a 22 handle move will revert at least 5 handles 70% of the time
  • People can't stick with their systems
  • Automated systems with tight stops don't work -- then you fiddle with the stops
  • Old traders just do the same thing in the same way every day
  • When you're trading right, it's boring, it's just execution
  • Throw away what the crowd is doing
  • So much trading wisdom from the past ("the trend is your friend") not relevant for day traders
  • Don't be a hamster on a wheel
  • You have to stick with your system, only possible if it fits your personality
  • "Averaging is groping for the top or bottom"
  • He doesn't scale, he just goes all in [scales out in two pieces however]
  • He never chases
  • If nothing sets up, don't push the button
  • Picture a pool filled with sharks, that's what you're jumping into to make money
  • Overtrading is the downfall of most failing traders
  • Many are operating on tilt, jumping from strategy from strategy
  • Always knows what he's risking, structured identically, dollar loss pre-determined
  • No slippage on his stops in SP futures
  • Traders always rode in last train car in case of derailment [always thinking about risk]
  • Good traders are not jacks of all trades, they specialize
  • Your strategy has to be about getting size on, otherwise there's no point
  • "Single digit midgets"
  • You get confidence from specializing
  • Two regimes: expansion and contraction
  • Tracks range of one minute SP to make sure his stop is "outside of the noise"
  • He went from having tight stops to having wide stops -- to protect him from himself
  • He knows the percentage of the time his wide stop will get hit -- he never fiddles with it
  • With tight stops, he'd be liable to fiddle with them
  • You need to be able to trade your system without feeling the urge to fiddle with it
  • Once comfortable with strategy, with your stops, your dollar losses, then you can build up your size
  • Exits in two pieces: first piece getting him 2.5 points on average, gets instant gratification, lets second piece take its time (averaging 7 points) 
  • Two to one win rate on his mean reversion trades [1R losers, 4.75R winners]
  • He's out there to help people, esp. persistent guys who don't lose money but don't make big money
  • Day trading is not a hobby, not an action junkie thing, it's a business, take it seriously
  • Says some kind things to Aaron in parting
  • Twitter: @Shaq48_Trading

Notes for Chat with Traders, Episode 20

Added on by C. Maoxian.

Episode 20 ... Kunal Desai (65:15)

  • Likes Costa Rica, it's like "Jurassic Park"
  • Dad is an engineer, always dabbled in the stock market, "the worst trader in the world"
  • Graduated high school during the dot com boom, everyone was a day trader
  • Opened first account with "buyandholdtrading.com"
  • Looked for ideas at MSN Money, Jim Jubak
  • Lost all his money in less than a week during dot com bust
  • Lost all his money again in Global Crossing, Nortel Networks, Lucent Technologies bust
  • Had years of this kind of up and down disappointment
  • These losses taught him how to be resilient
  • Met Paul Singh online
  • Indian people love to get free stuff from other Indian people
  • Desai had knowledge but no trading methodology
  • Had to corral what he knew and make a cookbook, systematize his knowledge
  • Build routines to build a trader
  • How do you size your position? You have to have a method
  • People freeze when they have a loss, deer in headlights, can't get out
  • A-ha moments come from competence and then repetition, practice time
  • Competence plus screen time, you begin seeing things clearly
  • People give up or blow up before they get requisite screen time
  • Takes thousands of repetitions, simulated or live or trade reviews, to reach a-ha moment
  • Took Desai *years* to get profitable
  • Paul Singh, veteran trader, passed down his knowledge to him 
  • Took another year before he said, yes, I can do this forever
  • How long do doctors and lawyers go to school before they make a buck? Years! Trading no different
  • Desai trades momentum stocks, a trend trader, both long and short
  • Read William O'Neil, made sense to him, better matched his personality than Buffett buy and hold
  • Earnings breakouts the most powerful thing he has seen in trading
  • Good daily chart an absolute necessity
  • Earnings surpises are the best, people rush in
  • High relative volume makes patterns very clean
  • Being a generalist will not make you money
  • Master one or two things, better than knowledge of 20 or 30 things
  • Mastery takes the thinking out of a trade
  • Once a stock gets in play, you trade it both long and short, keep it on your radar
  • Must understand your own personality, what you're comfortable with, what fits you
  • If you're uncomfortable, you're not going to trade well
  • Find something that you "vibe" with
  • He can't tame himself, he's a wild, aggressive man and accepts that
  • He has max loss on his trading account, $2,000 a day is his max ... stops trading at -$2,000 mark
  • Live to fight another day
  • When you see the market well, push it
  • Give back rule: if you give back half your gains, cut yourself off
  • He experiences FOMO a lot, worse for him than taking losses
  • "You chase, you die" -- condition yourself to know this
  • Market gives you endless opportunities, "on to the next one"
  • "Skills are cheap, passion is priceless" ... don't get into trading for the money
  • People without passion give up at the first sign of trouble
  • Long, rocky road to trading success ... need passion to get through it
  • It takes years and years and years before you make any money
  • You can't date, you miss weddings, birthday parties, etc.
  • You have to work like a dog, long hours, huge cost
  • Desai had desk job while he was learning how to trade, he was obsessed with trading though
  • His successful students all have incredible resilience
  • "Oh shit, this is going to be hard." People quit.
  • People get frustrated and give up, even with the simulator
  • Once people start live trading, their money is on the line, they go to dark places, the resilient make it
  • Lots of talented people just give up once they get knocked down
  • You are not trading chart patterns, you are trading your hopes and dreams
  • Can't learn how to trade when you need the money from trading
  • Every good trader is in good shape, no fatties, "get your pump on"
  • He needs to trade with a beach view, helps him maintain his perspective
  • Whoever you are, it will come out in your trading, get to the root of it
  • Everbody knows the patterns, everybody knows what to do, but only 1% can actually do it
  • bullsonwallstreet.com (est. 2008)
  • You need a mentor, a community, to learn how to trade
  • "My man!"
  • Twitter: kunal00

Notes for Chat with Traders, Episode 65

Added on by C. Maoxian.

Episode 65 ... Brett Steenbarger (59:20)

  • Read The Fountainhead by Ayn Rand as sophomore in college
  • Thought psychology could be used to make people do their best
  • University of Kansas grad school, late 1970s, political psychology degree
  • Trading his avocation, psychology his vocation -- parallel interest
  • The Psychology of Trading, his first book, written in 2000
  • Victor Niederhoffer, a friend and mentor, encouraged him to write a book
  • Teaching at Syracuse University medical school at that time
  • Chicago trading firm hired him away to work for them full time as trading coach 
  • Market makers he was working with didn't use charts or fundamentals, just the book (DOM)
  • Pro athletes still work with coaches even after they've made it; same is true of pro traders
  • Markets change, traders need to evolve
  • Identify and build upon strengths
  • Now he works with several hedge funds and financial firms as a consultant
  • Market volatility expands and contracts, traders need to adapt to that
  • Separate logical from psychological errors -- correctly identify that first
  • People are more sensitive to losing money than making money
  • Become exquisitely aware of your habits -- build self-awareness
  • Observe yourself, then re-channel yourself
  • He has four cats
  • Revenge trading comes from frustration, you want to make it back
  • Be aware that you are about to revenge trade, step away from screens, calm down
  • You can't change something you're not aware of
  • Commonalities of successful traders:
  1. Adapting to changing markets (trends, volatility, people participating all change)
  2. Building on strengths (day traders are good at fast thinking skills and pattern recognition; investors are slower, deeper thinkers)
  3. Cultivating creativity (seeing the world differently from others, seeing opportunities others don't see)
  4. Developing best practices (and turning them into best processes)
  • Best practices: how you generate ideas, manage positions, manage risk and reward, review your results
  • Trading Psychology 2.0 is his second book
  • You don't have to motivate yourself to eat breakfast, it's just routine
  • All your best trading practices should also just be routine, no motivational sticky notes on monitor needed
  • Repeat what you do every day until it becomes a routine ... all about repetition
  • Make the most of your competencies
  • Work around your weaknesses
  • Steenbarger knows he can't make markets, cognitively and emotionally he's unable to make rapid decisions and process lots of information
  • Steenbarger himself suffers from cognitive overload easily, needs to be able to reflect
  • Steenbarger tried to trade full time and absolutely hated it because he wasn't working with people [I'm the opposite]
  • Uses guided imagery to have traders imagine hitting their stops, losing money ... but staying calm and controlled
  • Effective goal setting requires a specific plan, a day to day plan
  • A goal without a plan is a wish
  • Not a fan of monetary goals -- performance anxiety is real
  • P&L front and center (the outcome) will mess up your processes
  • Better to look at improvement ... month to month, not just P&L, but risk-adjusted P&L
  • Make friends with loss and failure ... your losing trades teach you things, what changed? 
  • Embrace the mistakes you make, ultimately how we become better is by learning from mistakes
  • Don't think about your results in dollar terms, think in percentage terms 
  • Hard to take risk and make good decisions when you think you must succeed 
  • Make sure you have something in your life that's more important than trading
  • Trading shouldn't be the major part of your life ... you need to be balanced
  • Traders with longevity have some source of satisfaction separate from profits
  • A fascination with the markets themselves could be that source of satisfaction
  • Website: traderfeed.blogspot.com
  • Twitter: @steenbab

Notes for Chat with Traders, Episode 158

Added on by C. Maoxian.

Episode 158 ... Phil Goedeker (62:01)

  • During earnings season, small caps don't run
  • Wanted to make big money before his 30s, didn't want to do a lot of schooling
  • Only two routes: real estate and the stock market
  • Opened first brokerage account as sophomore in college with $3,000, lost it all
  • Studied everything he could, but couldn't find any consistency
  • Next summer's earnings of $3,000, lost it all during junior year
  • Didn't have patience to buy and hold
  • Finally discovered short selling as a senior in college
  • CAFE ("Host America") went from $5 to $15
  • He shorted as much as he could
  • CAFE was halted for a month, he was scared to death
  • CAFE opened at $5 from $15 and he made $15,000 [CAFE delisted in 2005]
  • Started shorting overhyped stocks exclusively during senior year
  • Turned $5,000 into $1,000,000 between August (2005?) and May (2006?)
  • He went all-in on every position he took, no rules, would just hope for the best
  • Graduated with an accounting degree, but knew he'd never be an accountant
  • Lost $500,000 by August (2006?) ... was "clueless"
  • Got scared, took $400,000 out, put it in the bank, kept $100,000 for his trading bankroll -- 22 years old
  • "Well hell"
  • Every month, whatever he made from the $100,000 trading stake, he'd put in the bank
  • Went next three to four years making half a million dollars a year -- 25 to 26 years old
  • Studied all the big winning stocks on a yearly, monthly, weekly basis -- till he was "blue in the face"
  • Drove a Hummer H2
  • He went through everything, every mistake, every high, every low
  • Never had another job other than day trading since sophomore year in college -- 13 or 14 years now
  • Wanted to make $30,000-$40,000 a month with his $100,000
  • Had one losing year in his late twenties when he strayed from his old style
  • Went back to his old style (shorting small caps) and went back to making big money
  • "Well hell"
  • Tried his best to eliminate his big losing trades, "cut his losses faster"
  • Increased position size on his golden setups and cut losses faster -- had even better years
  • Late 2017 had some golden setups: HMNY from $2 to $37; RIOT from sub-$10 to $46 -- "hype bubbles" [charts below]
  • Only plays from the short side
  • Momentum names are manipulated, low float (less than five million shares), press releases to pump them up
  • Cryptocurrencies are the same -- low float plus hype
  • Halt risk a major concern on these plays -- need to be cautious on the long side
  • Timing the shorts is difficult -- shorted 100,000 shares HMNY from $8.50, got out in high $9s -- took the loss
  • Starter size (5,000-10,000 shares) in positions -- goes against him, he takes the loss; goes with him, he adds
  • Never starts a short and looks to add higher ... never adds to a losing position
  • Day three of a parabolic move should be a winning entry, but who knows, it often isn't
  • He gets extremely aggravated entering the positon -- takes a lot of small losses
  • Pays a lot of attention to volume -- only looks at price, volume, and VWAP
  • Big drops on heavy volume is one of the main things he looks for
  • Bases his stops off the chart ... tries to find support and resistance levels on chart
  • Find your niche as a trader ... find out what you're good at
  • Parabolic set-ups are what he's good at ... puts all his money behind those trades
  • Timing the crash of these parabolics is the difficult part
  • So excited when he sees a parabolic set-up, he can't sleep at night
  • 75-80% of his trading income comes from shorting the parabolic moves
  • Multi-day versus multi-week versus multi-month runners
  • The higher it goes, the more conviction he has, the larger his position size
  • Gotten lazy because he has two kids now
  • Every year, prints out charts of all the stocks that are the year's biggest low float winners, all "pockets of air"
  • Every single one of them has crashed
  • Adds to his winners as they collapse, "slamming that bid"
  • He might hold a winner for weeks on end
  • Only overnight risk he has is a Press Release
  • Mentions ETRM from 2016? [now delisted]
  • Mentions KBIO ... stock went from $2 to $10 or $12 then went to $40 [now OTC]
  • Seen a lot of traders blow up holding low float shorts overnight
  • Wait for the backside of the move, "backside" is after it has exhausted itself [no clear definition of "backside" given]
  • Slams the bid over and over and over again... he definitely moves the stock by doing this
  • 95% of traders fail because they lose money [Ummm] ... they don't have their niche [OK]
  • Find out what you're good at and perfect it
  • Take it slow, take it in stages as you increase your position size
  • Has seven or eight brokers now, essential if you're short-biased
  • If you're long-biased, only need one broker
  • In order to short the stuff he's shorting, the broker has to have shares available [tell me about it]
  • Low float stocks -- most brokers don't have shares available
  • If one broker has the shares as easy to borrow, no need to look to his other brokers
  • Getting the locate is everything, without multiple brokers, you won't be able to play the low float parabolic game
  • Locate fees and fees for holding overnight vary from broker to broker
  • Locate fees and overnight fees are extremely high -- will take at least 10-15% of your gross profits
  • He was long GBTC, didn't realize it wasn't marginable, when it dropped he got a large margin call
  • He has traded beside other good traders who have blown up ... 5-, 10-, 15-year veterans who made one or two mistakes and they're gone
  • "You get stubborn and you're done"
  • Make sure you have a backup plan ... his is buying farmland in Missouri, then rents it to farmers
  • If he blew up tomorrow, he couldn't get a job because day trading is all he has ever done
  • He has owned a lot of rental properties and it's a "big pain in the butt," "nightmare tenants"
  • "Well hell"
  • Hired property managers to deal with tenants, then he had to manage the property managers (another nightmare)
  • Farmland, he can't touch the money, and it doesn't take away from his market focus
  • Farmland: zero stress, zero time, zero maintenance
  • "Thank you, sir."
  • Twitter: @Ozarktrades
HMNY, Daily

HMNY, Daily

RIOT, Daily

RIOT, Daily

Notes for Chat with Traders, Episode 10

Added on by C. Maoxian.

Episode 10 ... Tim Grittani (52:48)

  • Finance major at Marquette
  • Learned that he didn't like finance
  • Was into poker and sports betting in high school
  • Opened account with ShareBuilder(?)
  • Started randomly buying and selling 30 cent stocks
  • Lost half his account within a couple of weeks
  • Joined Tim Sykes' "Silver Package"
  • Blindly followed trade alerts from "gurus"
  • Had emotional trouble once money was on the line
  • Hiding his P&L helped him become less emotional
  • Went full time after six months of struggle, $1,300 in the hole
  • November 2011 (?) back to breakeven
  • Made a new mistake, learned something new every day for six months
  • Learned to focus on a couple main set-ups
  1. OTC Pump and Dumps
  2. Buying multi-week or 52-week breakouts
  • Frustrated with listed stocks because too many factors affecting stocks
  • OTC stocks trade in a world of their own
  • Learned to understand promotions run on OTC market
  • Promoters have email lists with thousands of people on them
  • Understood all the connected promoter websites, subscribed to all of them
  • Would try to act on emails he received as fast as possible, beat the crowd on the spike up
  • Would also buy breaks of daily highs on the pumped stock
  • Fine line with fraud regarding stock promotions
  • Learned liquidity all important
  • Began short selling promotions instead of buying them
  • OTC promotions would get halted and would re-open weeks later down dramatically
  • OTC market dead until marijuana stocks ran in 2014
  • Began short selling listed stocks in the same way he shorted OTC promotions
  • When he sees patterns forming, he knows what to do
  • His edge is his experience
  • Spends 15 minutes every night putting together the next day's watchlist
  • Lost $290,000 on a single trade, LAKE, 9.90 entry, October 2014 (chart below)
  • Refused to cut his losses when mis-timed his entries, would always look to add higher
  • Before LAKE, trades would always work out for him in the end, developed a bad habit
  • LAKE experience taught him to cut losses
  • You need the right broker for your trading strategy
  • SpeedTrader best to buy OTC promotions back then
  • Only trade liquid, volatile stocks
  • Identify and focus on your niche
  • Traded only two OTC set-ups (new promotions, breakouts), nothing else
  • Trade charts and price action only (not hype)
  • Everyone knows OTC stocks are garbage, but just as many listed stocks are also garbage
  • Never hold and hope
  • Cut losses intelligently, not necessarily quickly
  • Base stops on chart, not some preconceived dollar or percentage amount
  • Figure your size from your risk level ... dollar risk is constant
  • "Trade the ticker, not the company" -- a Nate Michaud saying
  • Couldn't live without a market scanner -- how he finds his plays
  • Top percent gainers with dollar volume requirements is his main scan
  • Hasn't read any trading books, but interested in trading psychology books most
  • Don't waste your time following trade alerts or mimicking trades
  • Just make your own trades, win or lose, figure things out on your own
  • Be mindful about volume and liquidity -- avoid thin stocks
  • Blog: tradetheticker.blogspot.com
  • Twitter: @KroyRunner89
2018-02-06_12-10-57 grittani.jpg

Notes for Chat with Traders, Episode 69

Added on by C. Maoxian.

Episode 69 ... John Carter (66:34)

Sounds like a down to earth guy, clearly another old pro. 

  • Loves the short side
  • Starts the year with a $180,000 account with goal to turn into a million 
  • Very aggressive trader
  • Been actively trading for 25 years
  • With experience comes patience
  • Difference between successful and unsuccessful traders is patience
  • Patience to wait for the set-up, patience to hold winners
  • If you get emotional and chase, you mess up your mindset
  • Opportunity cost of chasing is huge
  • 18-year old working at mall in cookie store, making $4 an hour
  • Saved up $1,000 over the course of a summer, bought call options on Intel
  • Made $800 in a week from those call options, he was hooked [what if he lost?]
  • Dad read Investor's Business Daily
  • Wired as a risk taker
  • Three times where he built up 10K to 100K with crazy position sizes
  • Then lost it all by trying to go from 100K to 1,000K
  • Mark Douglas' books helped a lot
  • Stopped trying to make a million dollars
  • Appetite for too much risk vesus too much fear
  • If you're too fearful, you can't make a living as a trader
  • Made 100K a year in the corporate world, figured he had to make the same if he traded full time
  • People who are too fearful wait for confirmation and that's the exact time you should be taking profits
  • Became friends with Mark Douglas
  • Douglas' insights into the markets and human mind were key
  • You should think probabilistically while you're in a trade -- anything can happen, no emotional attachments
  • Most people try trading for two years then give up
  • He used early trading profits to buy rental property
  • Later sold rental property to have bigger trading stake
  • Took him eight years of frustration to learn how to trade
  • Average trader with right tools, it should take two years to learn how to trade
  • How do you react when you have money on the line? Calmly take action or deer in headlights?
  • People need to find their sweet spot
  • Types of trading: day trading, swing trading, investing  
  • Nearly impossible to overcome commissions when day trading
  • Impossible to know what's going to happen three months out
  • Two days to two weeks is his sweet spot
  • Looks at 30 minute charts, that's the lowest time frame he'll look at, NEVER looks at five minute charts
  • Markets pop then consolidate
  • Cut his teeth on stock index futures
  • Big options trader on individual stocks
  • Old traders have "three set-ups and four markets" and care about nothing else
  • You don't do the same trades all the time -- depends if the market is bullish or bearish
  • You can be long, short, or flat
  • Flat is one of the best positions -- mind is neutral
  • "Don't piss away your chips" -- be patient
  • One or two days a month of focus are all you need with larger than normal position size
  • People who trade to alleviate their boredom piss away their capital
  • To become a good trader, you have to master exits (both stop losses and targets)
  • Options are priced for "expected moves" -- exit at dollar move that's priced in by options
  • Huge fan of Fibonacci extensions: 1.272 odds of getting there good (take bulk off), odds of getting to 1.618 much lower
  • Options nice because you can define your risk easily, you can only lose what you put up
  • Selling options is fun too
  • Mistake that novice options traders make is looking for cheap options
  • Out of the money options are designed to suck people in and expire worthless
  • If you're bullish on something: buy an in the money call and sell a put credit spread (expires worthless)
  • If you're bearish on something: buy an in the money put and sell a call credit spread (expires worthless)
  • Greeks are a distraction to him, he never looks at them
  • Favorite set-up: "Squeeze" -- Bollinger bands are inside of the Keltner channels
  • Bollinger band contraction eventually leads to range expansion
  • He never looks at a chart for more than a split second
  • Best set-ups are obvious instantly ... don't stare at it and force things
  • All set-ups should be simple enough to explain to a twelve year old
  • Any more than three indicators on a chart is too many
  • Wins and losses are randomly distributed ... you need a large sample size to come to correct conclusions
  • Easy to get lost in indicators, price is the most  important thing
  • January 2014, (14 15 16, he can't remember), big TSLA trade [it was Jan. 13]
  • Likes to track short interest ... TSLA at 40%
  • TSLA had been down ten, suddenly up five
  • Bought 100 call options of TSLA at $6 (account was $1.5MM)
  • Ended up adding and adding, built up to 1000 call options in TSLA [half the account?]
  • Trade went against him a little, so he took a shower, trade stabilized
  • Sold half into close, half into next morning's gap up -- made $1.4MM
  • No more million dollar day trades since then for him
  • Everything came together ... takes guts to hold on to those concentrated positions
  • When things happen that shouldn't happen, people are on the wrong side, big things happen
  • Get on the other side of other people's pain  [I like it]
  • He likes three or four large positions to 18 small positions
  • Don't shotgun, be patient and focus
  • When he was young, he wanted to make that one big trade
  • When you're older and more confident, you have your skills and you get patient
  • Anyone who trades for a living has developed confidence despite constant uncertainty
  • Get comfortable being uncomfortable
  • www.simplertrading.com
  • 1000 members in his gold-level chat room
  • Twitter: @johnfcarter -- infrequent twitterer

Notes for Chat with Traders, Episode 32

Added on by C. Maoxian.

Repeat guest ... first heard him on Episode 66, listened out of order. 

Episode 32 ... Dan Shapiro (68:43)

  • Grew up in Brooklyn
  • Lacked direction in life
  • Generic Trading / Carlin Equities (1999-2006),  sold to RBC [in 2007]
  • Borrowed money from neighborhood loan shark
  • Ron Shear at Generic Trading hired him
  • Met Mayer Hoffman, great prop trader (made hundreds of millions)
  • Did well during dot com boom
  • Would just buy the dips and did very well
  • Dot com bust and 9/11 changed everything
  • Didn't make any money for two years
  • Incredibly depressed, would sob himself to sleep
  • End of 2003 started making money again
  • People trading off their iWatches while on vacation on social media (it ain't real)
  • "Here's the deal"
  • Grew up poor in Brighton Beach, mom a manicurist, dad a waiter
  • Tasted success trading during dot com boom, had no Plan B
  • If he didn't succeed at trading, he would have killed himself (he's serious about this)
  • No highs, no lows to trading, it's just work
  • Wife told him he'd have to get a real job
  • Make $100 a day first, then go from there
  • Stocks trade in intervals, like steps in a staircase
  • Stocks go from supply to supply and demand to demand
  • Most stocks are not trade-able
  • Most traders have no patience and no bankroll and no education
  • Looks at 60 minute pivots
  • Figure out who the hell you are
  • Where emotional buyers meet technical sellers: the supply zone
  • The more hands you play, the quicker you'll figure things out
  • He'll only be 6'2" if he puts on his wife's 4" heels -- be realistic
  • Figure out what not to do
  • How do you mentally stay afloat? Turn off your P&L
  • The more emotional you are about a trade, the more you'll mess it up
  • Don't walk away from the table when you're dealt pocket aces
  • Trade the set-up, not your P&L
  • Can't take trading to heart, you have to have a sense of humor
  • The revenge trade does not work, ever
  • You can't cry your money back to you
  • A lot of traders can't accept defeat
  • Lose the battle, not the war
  • The market takes your money and your confidence
  • You don't lose your confidence, it gets transferred to another trader
  • Don't let things snowball, get a massage, go to a sauna, do something nice for yourself
  • Listens to Sade to get depressed which makes him angry which makes him a better trader
  • Makes his money as a swing trader in a trending market
  • Dumb money trades in the morning and smart money trades in the afternoon
  • Will keep a good runner overnight
  • Treat trading like a business, it isn't fun
  • You don't serve filet mignon on a paper plate
  • Mayer Hoffman, Jason Lieber -- they'd tell you if you were trading like a putz
  • Hoffman taught him there's no such thing as overbought
  • "Whatever goes down, should go lower"
  • Price action dictates everything, opinions don't matter
  • Don't fight price action
  • Turn off social media, read good blogs instead, old vets
  • Every trader he knows has blown out, including Mayer
  • He never sells dreams, only reality
  • Don't think you're alone, keep your head up
  • "The rich people don't live in Times Square"
  • Twitter: @DanShep55

Notes for Chat with Traders, Episode 157

Added on by C. Maoxian.

Repeat guest, formerly featured in Episode 119

Episode 157 ... Alex @TAGRtrades (62:23)

  • Wife takes care of their new baby (four months old)
  • Hasn't had a full night of sleep in four months
  • Child care $30K a year so doesn't make sense for wife not to stay at home [only in 'murika]
  • December 2017 his best month to date
  • Bitcoin / Blockchain mania at end of year 2017, he was able to catch that
  • MARA, DPW, RIOT his main plays ... sympathy plays
  • He would buy the one that was still red when the other two turned green
  • Lots of liquidity, easy to trade size since exits so easy
  • June 2018 will be five years of trading full time
  • Have to know what are the leaders and laggards in a sector
  • He knew when to back off, take the foot off the pedal, this time around
  • When friends and family contact you for advice, it shows the end is near
  • One or two days a month was where he made the bulk of his gains
  • Equity curve looks pretty when stretched out, but if you zoom in it looks choppier
  • Compounding is the key
  • Only one day this year with zero trades, but quite a few with only one or two trades
  • Stocks that he trades are low float, under $10 ... lots of liquidity issues
  • Makes errors, then doesn't correct them, tries to wriggle out, problems snowball
  • Trying to be better about 1) market preparation; 2) holding longer; 3) getting bigger 
  • In order to get bigger, you have to get better [great saying]
  • Liquidity issues are huge when your account size gets bigger
  • Lives in central time zone, market opens at 8:30 AM
  • Starts looking at market about 90 minutes before the open
  • Develops watch list night before -- stocks to watch
  • Puts 12 charts on the screens at once
  • Looks at daily charts for support / resistance levels
  • Following the right people on Twitter is important for getting news
  • Pays for two news services, squawk boxes (TradeXchange, Benzinga Pro); worth the money
  • He's in favor of journaling, but doesn't do it as much as he used to
  • He's not a big spender, seeing himself down $2-3K in a trade still painful
  • When he has a big day, he doesn't celebrate
  • Still risks same percentage per trade (max 2-3% loss) as in the past
  • Has no confidence in his swing trading ability yet
  • People say he's just a long-biased trader in a giant bull market (to put him down I guess?)
  • Now he's 85% on the long side, 15% short side
  • Short trades are 1/20th the size of his long trades
  • Never adds to his short trades, takes one shot
  • Watches top ten most volume names closely
  • Uses finviz.com to scan ... under $10 stocks, trading 2.5x average daily volume (whatever the default is)
  • Great charts don't matter if the volume isn't there
  • Looks closely at all the charts (20-30) from scan above
  • Low float, hot sector, high short interest, good chart setups
  • Knows top five and bottom five from his list
  • Always starts with the daily chart, only looks back 20 days for high / low resistance
  • Then looks at the hourly chart for support / resistance
  • Uses 3 minute chart to enter trades
  • Looks for flag and pennant patterns after a breakout
  • Uses VWAP on every single chart, but doesn't overanalyze it
  • VWAP gives you a quick basis of where the average person stands
  • Adds 200- and 50-day moving average to charts as target levels (since other people look at those levels)
  • No longer scales into trades, he just goes all in now, max risk from single entry, one shot
  • Quickly takes profits on a piece, then slowly scales out the rest (1/5th his size left at final target, e.g. 200-day MA)
  • Self-discipline all important, be flexible, make adjustments
  • New traders see one mold, try it, it doesn't fit them, they give up or lose a lot
  • Be flexible instead, find what fits you
  • Twitter: @TAGRtrades

Notes for Chat with Traders, Episode 156

Added on by C. Maoxian.

Episode 156 ... Michael Katz (59:45)

  • Has three kids, two boys and a girl
  • Started in markets, late 1990s, then in his late teens, during internet boom (born 1980?)
  • Opened first account with a couple thousand dollars 
  • Blew up a couple of accounts early on
  • Discovered equitytradingonline ... Gary Roth
  • Seven Points Capital (Mike Mangieri, Gary Roth, Mike Katz) started as execution firm
  • Started trading "parity" on NYSE 
  • Parity: buy on the bid through the floor broker, could easily scratch the trade, "risk free"
  • Getting good locates is a key edge a prop firm can provide [don't I know it!]
  • Scalping with size in high volume stocks within $5 to $20 range
  • Trades 50 million shares a month
  • Uses hot keys
  • Scales in and scales out
  • Has 15 different set-ups, each with its own rules
  • Descending triangles in low-cap trash names that have flown ("Flying Pigs") ... look for a lower high
  • Enters within the triangle, enters the break of the triangle, enters the retrace to base of triangle
  • ECN rebates don't make much difference to his P&L 
  • Trades eight to ten names on any given day
  • Will swing trade ... if it's green and it's working, he'll keep it; then exit rules come into play
  • The best trades start working right away
  • Whatever is gapping, he'll notice it
  • Uses scanner to find intraday setups: volume, volatility criteria
  • Watching volume important to him
  • Recommends Anna Coulling's book, A Complete Guide to Volume Price Analysis
  • He looks closely at Volume Profile
  • Consistency is what differentiates great traders from lucky ones
  • Need a clear and definable edge
  • Avoid large losses, scale back when you're not performing well
  • On the other hand, scale up dramatically when you're feeling in the zone
  • Always knows where he's getting out before he gets in
  • Amateur traders just hope for the best, never even consider their exit when wrong
  • Risks a fixed dollar amount on every trade
  • Sizes his positions based on stop price and fixed dollar loss, determined in advance
  • If he breaks his rules, he sizes down, slows down, takes a day off
  • Rule breaking very important to pay attention to [recognize when you're going on tilt]
  • Taking losses quickly, which most people can't do, itself is an edge
  • Reading order flow, observing patterns, also both edges
  • Big fan of journaling
  • Sports, trading, poker are all the same: you have a game plan, you execute during the game, then review the tapes afterward
  • Over time you develop a trading method
  • He still loves watching trading videos on YouTube, seeing what other people do
  • He's willing to learn from everywhere he can, then makes it his own
  • Can't imitate someone else's method, only yours will work for you
  • Establish rules for each set-up
  • Surround yourself with good, smart people who can mentor you
  • Be careful because there are false gurus and DVD sellers out there looking to take advantage of you
  • There are great traders on Twitter (mentions SmashTheBid) who are under the radar; seek them out
  • Katz says some kind things to Aaron in parting 
  • www.sevenpointscapital.com
  • Twitter: Michael_Katz11

Notes for Chat with Traders, Episodes 149 and 150

Added on by C. Maoxian.

Episodes 149 & 150 ... Aaron Brown (59:21, 64:19)

Interesting guy ... clearly not a conventional thinker or person ... I enjoyed it.

  • At AQR ($200 billion quant fund) for a decade
  • Didn't like the commute to AQR
  • Liked reading numbers in back of newspaper (sports and financial statistics) as a boy
  • Read Thorp's Beat the Dealer, fascinated by it
  • Grew up in the western US in the 1960s (Seattle)
  • Became obsessed with money around age 14 in the early 1970s
  • People who lost their jobs in the neighborhood disappeared; it was creepy
  • Very shy kid, 14 years old, tried to play poker to make money, and it worked
  • Went to Harvard, took a lot of math and statistics, graduate courses only, Harrison White signed off on it
  • Harvard grad students are dumber than Harvard undergrads, classes more interesting at grad level
  • Becoming better known as pro poker player ... also did a lot of sports betting
  • It's hard to scale up when you win at poker
  • Your unconscious brain wins poker at the highest levels, not understanding the numbers
  • Have to enlist your unconscious brain to win at high levels of poker
  • Don't let fear and greed drown out the quiet voices in your brain
  • Good traders use their unconscious brain to make good trades
  • Sleep deprivation stimulates a certain kind of learning
  • You need to know yourself, what motivates you
  • Your conscious brain isn't consulted when you make decisions, you just make up excuses after the fact
  • 1978-79, people didn't really know how to trade options
  • If you could do option math in your head, you could make money
  • Floor trading options you can pick up crumbs, but you can't scale
  • They were worried about the speed of sound in a 20 foot radius around options specialist post [not the speed of light as in the HFT age, a funny comment]
  • You had to physically be in the pit, and the trades were small time, no big lots
  • Couldn't get rich betting sports games, but you could get rich running a bookie operation
  • Entered Ph.D. program in finance at U. of Chicago 
  • Managed billion dollar bond fund in the 1980s
  • Head of mortgage securities
  • Crash of 1987 hurt everyone
  • Became a professor for a time
  • Went to work for JP Morgan
  • It's easy to make money, but hard to keep it
  • Invented the term "risk management" (outside of the insurance industry), didn't mean "risk minimization"
  • Front office risk manager decides how much traders can bet
  • CEO talks to middle office risk manager who talks to the front office risk manager who talks to the traders
  • Started at AQR in May 2007 and crisis hit in August 2007
  • Cut risk in late July 2007 just by chance
  • Losing a worst-case loss for a year every day, day after day, for three days
  • Cliff Asness called the bottom of it, whether by chance or not, no one knows [Cliff is now a billionaire]
  • Quant equity crisis of 2007, everyone forgot about it after the 2008 crisis hit
  • Featured in Scott Patterson's book, The Quants
  • 3000 longs and 3000 shorts simultaneously, make tiny gains with massive leverage, that's the idea
  • Quant equity funds all had overlapping positions, this was part of the problem
  • Funds don't have to report their short positions, only longs
  • Brokers can tell you what is Hard To Borrow
  • Quants are engineers, logical ... learn from mistakes
  • Quants don't like to change bet size just because of losses, hate drawdown control policies
  • Down 10% in a month, whether through losses or redemptions, clients can terminate contracts
  • Let investors out who want to get out, you don't want them in your fund anyway
  • You never want to be in a trade where the risk is managing you
  • All words for risk have some opinion attached to it (either positive or negative)
  • Traders have a very different idea about risk
  • Risk is something we exploit, it's like energy, and we respect it
  • Most people like predictability, but some people are more spontaneous
  • Gamblers and thrill seekers trade with no edge
  • The goal of trading is making money, that's your job, nothing else matters
  • Most people don't know why they do what they do
  • Most people who try to trade are pursuing some silly illusion
  • The best traders do it because they can't imagine doing anything else
  • You want to start risk taking when you're young, can't do it when there are "adult stakes"
  • The best traders are really bad about explaining how they manage risk
  • Traders who try to swing big to make up for past losses, it's a disaster
  • But you have to be willing to make big bets even after a series of losses
  • How far do things have to go against you before you know that you're wrong?
  • Traders internalize two ideas: they might be right and they might be wrong
  • How much does it make if you're right, how much does it lose if you're wrong?
  • Only need two scenarios in your mind for any trade
  • You equally weight both scenarios in your mind
  • How much are you willing to lose when you're wrong? Must decide this first
  • Most traders leave too much money on the table most of the time
  • Most traders spend 80% of pre-trade strategy about capping the downside
  • They should spend 80% of the time figuring out what they're going to do if they're right
  • How do you exit a trade when you're right? This is the key question
  • Some people want to win a lot of pots (at poker) instead of winning a big pot
  • You have to know who you are ... do you prefer scalping (winning lots of pots) or holding for a larger gain (winning an occasional big pot)?
  • You should know your profit ratio: average win on winning trades divided by the average loss on losing trades
  • Your win ratio is going to be whatever it is... think harder about your profit ratio
  • Don't try to guess what will happen, just prepare for what might happen
  • Risk avoidance mistake: start small and then get bigger (you should reverse this)
  • Plan for success! Pick a size and stick with it
  • Emotional decision making means reckless decisions
  • Focus on median outcomes (not the average outcome) ... look for good median outcomes
  • Kelly Criterion teaches us that if you take more risk, all you do is increase probablity and size of bad outcomes
  • Every trader MUST understand the Kelly Criterion (read Thorp's book)
  • Haghani experiment with bet size with biased coin very telling ... most people (financial professionals) went broke!
  • Every finance professor in the country should have been shocked by the Haghani Experiment (but they didn't care)
  • Things happen that you can't put in your probability model
  • 1% of the time you have no idea what's going to happen -- it's not predictable 
  • Takes significant amount of resources to maintain a Value at Risk model
  • Good non-specialist description of VaR: Financial Risk Management for Dummies (a book he wrote)
  • Kelly Criterion teaches you to design trades with maximum loss in mind given your edge ... gets you in the right ballpark
  • Haghani Experiment proved most people have no idea how to size a bet
  • Professional gamblers he asked all instantly knew the optimal bet size in the Haghani Experiment
  • His website: www.eraider.com (lots of fascinating stuff on there)

Notes for Chat with Traders, Episode 153

Added on by C. Maoxian.

Episode 153 ... Xiao Qiao (64:39)

  • Studied engineering, math, finance, statistics 
  • [Is he first generation Chinese-American or did he grow up in China? Moved to America as a child? Fluent English, but non-native to my ear] 
  • Liked Applied Mathematics
  • Both parents are engineers (Dad a mechanical engineer)
  • Did materials science engineering, didn't like working in a lab
  • Went to grad school for finance, Ph.D. program, University of Chicago
  • Probability theory, applied statistics, linear algebra
  • Asset pricing research
  • Preferred to go into industry rather than become an academic
  • Was teaching assistant for Eugene Fama in his asset pricing class
  • Fama demanded that students be both precise and concise
  • Lars Hansen taught him to take economics seriously, always apply economic thinking
  • Five years to complete a Ph.D. in finance at Chicago
  • Enjoyed playing blackjack in college
  • Blair Hull's personal assistant emailed him about market timing paper Hull was writing
  • Hit it off with Blair Hull, agreed to co-author paper on market timing
  • A Practitioner's Defense of Return Predictability
  • Team play for blackjack important, MIT team employed this method
  • Don't play if you don't have an edge
  • Bet table minimum when the house has the edge
  • Bet size hugely important once you have an edge
  • Most people who try to play to win don't have an edge
  • Academic research divided about market timing 
  • Return predictability (can we forecast returns?)
  • Forecasting equity premium, combining return predictors
  • Modeling six month ahead excess returns
  • Examples of return predictors: PE ratio, CAKE ratio, variance risk premium, etc. 
  • Forecasting horizon shortened to one month for next white paper
  • Return Predictability and Market-Timing: A One-Month Model  
  • Reads a lot of academic research papers for his current job
  • Likes Frank Diebold's blog
  • [I guess he went to U Penn undergrad]
  • [Losing listeners in the late 30 minutes mark as talk strays into CAPM]
  • Try ideas yourself, don't just read about ideas
  • Simple linear regression goes a long way toward telling you if your hypothesis is any good
  • Lower frequency risk premiums: holding period in months, execution doesn't matter much
  • R, Python, Matlab code will be fast enough to implement
  • Higher frequency trading: holding period is intraday or days... execution becomes very important
  • Execution is where you make a significant fraction of your profits if your holding period is short
  • C++ necessary then ... code needs to be fast enough to trade in real time
  • Backtests are inevitably overfitted ... need to use out of sample data to test your model
  • Look at: Returns, Cumulative returns, Sharpe Ratios, Volatility, Cumulative Drawdown, Maximum Drawdown, Tail Correlation
  • Tail events, extreme events ... look how your model does during these
  • Trading costs, transaction costs, turnover, slippage are supremely important ... academics ignore these factors ("market microstructure")
  • Intermediaries are all-important, can make or break your returns ... practitioners are well aware of this, academics ignore it
  • Risk premiums important, but market impact, liquidity equally important
  • Rebalancing a portfolio during illiquid periods will affect returns
  • Frequency of rebalancing also important
  • His website 
  • This Xiao Qiao should not be confused with Zhou Yu's wife, the anime girl
  • He is not on Twitter

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

 

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

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