Notes for Chat with Traders, Episode 128

Added on by C. Maoxian.

Episode 128 ... Andy Kershner (49:55)

  • Geologist by training
  • Ski bumming, early 1990s
  • [Has a laconic speaking style, a native Texan]
  • Started trading options out of the library with his buddy with $5,000
  • Dyslexic friend, Scott Dyer?, in Texas, great at pattern recognition, "savant-ish"
  • Top 100 IBD names, trade options on them ... all pre-internet
  • Turned $5,000 into $1,500, couldn't get the prices they saw on the screen
  • SOES came into being, little guy finally had a chance to get quoted prices
  • Went to Cornerstone Securities, which became ProTrader, in 1996
  • David Jamail, David Birch -- founders of Cornerstone?
  • ProTrader started with 12 seats in Austin, 500 day traders across branch offices at their peak
  • Sold ProTrader to Instinet in 2001, kept proprietary trading group
  • He lives and breathes trading
  • Cornerstone willing to hire savant buddy, but not him, he was a "trainwreck waiting to happen"
  • Worked part-time jobs, was friends with all the ProTrader traders in Austin
  • Made one trade a day on the side at first
  • Markets change, strategies changes, but habits don't change
  • Once he was on his own and loaned enough capital, he made 100K a month "forever"
  • 80% of his trades were scratches or small losses, 20% were big winners
  • He's from the era when there was a human on the other side of the trade (mid-1990s)
  • Computer models today are always searching for stops, no more human involvement
  • His biggest strength/weakness: he can take a lot of pain
  • Big numbers don't bother him
  • Trade according to your psychology, do what works well for you, and is repeatable
  • Find an edge and see how large you can do it without changing what you do 
  • Best traders trade 100,000 shares exactly the same way they trade 1,000 shares 
  • [He means the decision-making process, not the actual execution which is different]
  • If you're sitting in a seat all day, you might as well being doing some size
  • He ladders in and out of positions now
  • Risks 1.5 to make 3.5 to 4 ... 50:50 odds he's right
  • Will triple his size when he thinks he can win big
  • Lots of styles work: scalpers, swing traders, high win rates, low win rates ... it can all work
  • Have to discover what you're good at, amount of risk you're willing to take
  • Develop good habits: journaling, reviewing, preparing
  • Strategies don't matter, good habits matter
  • Exercise and rest important
  • Review at end of day, what you got right and wrong, journaling
  • May 23, 2017 ... his MOMO position, wanted out 46-48, didn't happen .. tanked to 38, sold 41 
  • Lost 90K more on that trade than he expected, gave it too much room [charts below]
  • He didn't have his game plan structured well enough, too much thinking on his feet
  • Have to do what you think you have to do ... making and losing money doesn't matter
  • Fades overextended moves, laddering in, both on the upside and downside
  • Where people are getting stopped out, that's where you should step in
  • Trades 100% US equities and loses money consistently trading options [he has a sense of humor]
  • When you know that you're wrong, get out
  • He ladders in equal-sized usually ... position sized by liquidity and confidence
  • Find 3-4 : 1 RR winners, win ratio a little better than 50%
  • Add to your winners, not your losers
  • Teaches people good habits for six weeks at his firm, then they go live
  • Looks for people who have overcome adversity, people who can act with limited information 
  • Engineers tend to be bad discretionary traders
  • Common mistake new traders make is thinking it's easy
  • Only 2 out of 10 of the carefully chosen, great people he takes in make it, takes years to make it
  • Need your finances in order before you start, need your working spouse to float you for those *years*
  • Recommends reading Reminiscences of a Stock Operator, Market Wizard books
  • Find the best short-term trader you can find, and go work for him (her)
  • Shortcut your process
  • He talked to all the best traders at first in Austin and cut learning process from five years to one month
  • Good trading goes against basic human instincts -- fight or flight, have to do the opposite
  • Good trading requires extreme discipline
  • Don't keep doing the same thing if it's not working
  • If you're overly emotional, look into automated trading
  • Do you care about being right or making money?
  • Software eating the world, everything is getting automated, incl. trading and investing
  • AI is only a tool, still need smart humans to employ it
  • Generally uses Python to build models
  • www.kershnertrading.com
  • www.cloudquant.com

Loving the Real Cheryl Lynn

Added on by C. Maoxian.

Thrilled they have a live version of this great song on YouTube ... an amazing voice ... and I think that's one of the songwriters on the piano:

Music

My Life, My Love, and My Lady

Added on by C. Maoxian.

A Billboard #1 when I was two ... I remember it well. 

Looking Glass: Buy/Listen - https://lnk.to/LookingGlass!ytbrandy For Looking Glass and other hits from the 70s, listen here on Spotify - https://lnk.to/70sSH!ytbrandy Follow the Official Looking Glass Accounts: Spotify - https://lnk.to/LookingGlassSI!ytbrandy Facebook - https://lnk.to/LookingGlassFI!ytbrandy

Notes for Chat with Traders, Episode 96

Added on by C. Maoxian.

Episode 96 ... "Nico" (71:07)

  • Has two 43" screens, Dell multi-clients, 12 usable virtual screens, 4K resolution
  • Previously four 24" screens and one vertical 28"
  • Ikea desk
  • Aug 2016 best month to date [podcast recorded in Sep 2016]
  • Worked for software development firm out of high school
  • Wanted to make more money
  • He didn't want to take core college courses, just computer science, dropped out
  • Built his own software development business from nothing
  • First client he had was a successful stock trader
  • Discovered that microcap stocks moved 20, 30, 40% in a day
  • Lived paycheck to paycheck in the beginning, had no savings
  • Had to save up money for a year to build trading stake
  • [Blipped out some bad habit?]
  • Do not quit your day job! Try something on the side first
  • First trade in early 2007, bought AAPL, no time horizon, sold dame day for $100 gain
  • "Easiest $100 he ever made"
  • Didn't want to work in a cube and make $100
  • Used Telechart by Worden Brothers in 2007, had built-in chat window, that was cool!
  • Charting appealed to him, fundamentals "too much work"
  • Timing the market using charts -- instant gratification
  • Did not know about shorting at first, just went long
  • Microcap market of 2007, he made $20K just getting long microcap runners
  • He thought, "this is easy" -- worst thing that could happen
  • First account was $5,000 with Fidelity
  • Either the market changed or his luck ran out, but he kept "pulling the handle" (slot machine reference)
  • Second year lost all his profits, cold reality slammed him in the face
  • Now he understood why trading is "damn near impossible," 90%+ fail 
  • Lost consistently for the next seven! years
  • Easy to lose trading profits, hard to lose "legitimately" earned income
  • Started to put his size in check, started trading small, $5,000 positions, maybe $10K
  • He would hit periods of profitability during those seven years, but then give it all back
  • He was making a good living as a software developer, trading losses didn't really matter, "slow bleed"
  • Three steps forward and five steps back
  • At one point he had over $25K, not shackled by Pattern Day Trader rule
  • Wished he didn't exceed PDT rule, wasted a lot of time and money
  • PDT rule exists because of degenerate gamblers (like he was)
  • Loves solving problems and puzzles, thought he could figure out the market
  • This shit is tough, I'm getting my ass handed to me, small size kept him from blowing up
  • As the years passed, self-doubt crept in, but people supported him despite his failures
  • Periods of profitability gave him hope
  • Can't be luck alone, because he's losing more than he's making [made me laugh]
  • Reached end of his rope, had a serious sit-down talk with himself, sick of adding money to trading accounts and losing it
  • Went full-time, stopped growing his software biz, focused solely on the market
  • Never had Facebook, MySpace, Instagram, Snapchat
  • Traded in isolation for those eight years, floated around, went nowhere
  • Discovering Twitter changed everything for him, every trader is on there [even good ones ;-)] 
  • Discovered shorting, those first eight years were long only
  • Investors Underground gave him a connection to good traders
  • His software biz big enough, successful enough, he can make his own hours, and has savings
  • He loves shorting, 90% short, 10% long
  • "Flying Pigs" ... short the microcap junk companies doing dirty stuff to boost stock price
  • Fluffy PRs, huge gaps up, presents good opportunity to short
  • Look at pre-market movers and gappers
  • Look at pre-market unusual volume
  • Has a watch list called "Pigs" ... every pig encountered is added to the list
  • Has 200 pigs on his list 
  • Pig list sorted by net % change, former runners appear once again, no homework needed
  • Top of the net % change list become his candidates for shorts
  • Wait for the backside, "crack VWAP," or "high of day rejection"
  • Shorting the frontside is stepping in front of a train, have to make an educated guess where the top is
  • Controlling your size is everything, don't be a gunslinger
  • He isn't comfortable sizing up because he still has lots to learn
  • One bullet shooting only necessary if you can't scale in
  • You can't improve what you don't measure [smart]
  • Account balance alone isn't a truly useful measure
  • Start plotting your equity curve
  • Puts everything on Twitter to curb his degenerate gambler impulses
  • Stopped overtrading, being impatient
  • He's the rare guy who thinks you should post your P&L publicly [I say: bad idea]
  • All about accountability, kept him from being reckless
  • Aaron mentions that you must have measures other than P&L to measure success [from "HF71"]
  • Track your daily P&L in great detail
  • Take a scientific approach and measure what you're doing
  • Develop good habits ... he had bad habits for eight years
  • Identify what you struggle with: Are you impatient? Are you a degenerate gambler?
  • Don't trade in solitude, surround yourself with better traders who are like-minded
  • One wolf hunting for food isn't going to eat as well as a member of a pack
  • Boy Scout system, try to keep each other out of trouble
  • Has developed spreadsheet for trade tracking, willing to give it away from free
  • Lots of people pay for TraderVue, but can just use his spreadsheet
  • Twitter: @inefficientmrkt

Looking at the Short Squeeze in DryShips

Added on by C. Maoxian.

The notorious $DRYS did yet another reverse split on Friday, July 21 (this one 1:7). I've been avoiding shorting this stock because I've been fearing a squeeze, which would happen the moment I got short, thinks Mr. Paranoid. I hadn't thrown in the towel and finally shorted it, but there was a wicked short squeeze last Friday. I didn't make a dime off of this expected squeeze, mainly because I was too busy tweeting about it instead of playing it.

My Twitter addiction costs me so many opportunities, and I have to work on curbing my need to be publicly "right." I really need to force myself to shut off Twitter during market hours ... I just have to go cold turkey. Catching this one trade could have made my week / month / year!

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Notes for Chat with Traders, Episode 98

Added on by C. Maoxian.

Episode 98 ... Peter To (80:04)

  • 2004 started playing online poker, 15 years old
  • Inspired by Chris Moneymaker winning WSOP in 2003
  • Wasn't athletic, all intellectual power, poker a good fit
  • Deceived Mom to fund his PayPal account to fund poker account
  • Started with $20 and lost it all, devastated
  • Second $20 he tried to make it work playing 10 cent blinds
  • Did hand analysis on 2+2 forums
  • He was playing tight, but too passively, not getting enough money into the pot
  • First became profitable limit player, then profitable no-limit player
  • Turned $20 into $20,000 over two and a half years
  • No innate talent for poker 
  • Never plays poker anymore, edge is too small now
  • Lives in New York City, comes from Southern California
  • Poker has advanced so much, so sophisticated today, very hard to win now
  • "Game Theory Optimal" -- everyone knows the correct line now, everyone knows the math
  • Poker has become an efficient market now [smart comment, he's right]
  • Lost the passion for poker ... no fun chasing bad players online [even worse to do it offline when face to face]
  • Variance in poker also very high
  • Knew nothing about the stock market until college
  • Best friend talked about trading and investing, interest piqued
  • Natural transition from poker to trading
  • Got interested in 2008 2009, Great Financial Crisis
  • Started out as a gold bug, feared hyperinflation
  • Bought physical gold coins with his $20K, paid 8% spread [I'm chuckling, but it's good to be suckered at first, I believe]
  • Still a big libertarian
  • He's able to debunk himself quickly, fortunately
  • Sold his gold coins for breakeven
  • Second stage he was a value investor -- read Ben Graham, Peter Lynch
  • Bought Apple, Wells Fargo, Baidu, Dow Chemical all at the lows during the crash
  • Realized he didn't have the patience to hold all this stuff
  • Turned $20K into $30K, got account over the pattern day trader rule
  • Third stage: day trader using technical analysis
  • Mom's friend taught him how to read charts and structure trades
  • Read a lot of blogs, sourced his learning from all over
  • Discovered the ARCA pre-market cross in OTC junk stocks
  • Stock closed at $1, offered in pre-market on ARCA at $0.85
  • Would pick off all those $0.85 offers pre-open then sell for $1 at the open
  • This happened from time to time over two years, a few times a month
  • OTC market making is manual ... quotes not honored ... shady stuff
  • Moved to NYC and started prop trading
  • Doesn't want to name prop firm
  • Had been trading every day for two years while in college
  • Started trading club in college
  • Good things and bad things about being in prop firm, but experience invaluable
  • Many prop firms are about "burn and churn" ... get a guy in, get commissions, until he blows up
  • Prop firms would "fine" people ... e.g., couldn't trade odd lots
  • Prop firms can offer capital to scale stategy, proprietary technology to enhance strategy
  • Started meeting seven-figure traders, their strategies not do-able on a retail platform, needed capital and technology of prop firm
  • Compares a good prop firm to a good farm team in baseball [nice analogy]
  • Read Glassdoor about every prop firm you're considering, lots of shady practices
  • Big red flag is if prop firm requires a deposit
  • Careful of groupthink in a prop firm, herd mentality, tunnel vision
  • There's lots of ways to make money trading, not just momentum
  • Wants to catch all-day runners
  • Unusual volume, unusual volatility, unusual attention being paid to it
  • Not intellectually deep, just using intraday chart, price and volume
  • Shorting parabolic microcap stocks, thesis is overextended junk will eventually collapse
  • Trick is timing the turn precisely, how to minimize damage when your timing is off
  • Takes years to hone this skill
  • Follow the order flow, can't just rely on your shorting-microcap-parabolics-play, they dry up
  • Chapter on Jimmy Balodimas in Schwager book made big impression on him
  • "Stepping in Front of Freight Trains" -- fight trend, add to losers, fades huge moves, gave self huge leeway, took quick profits, in short Jimmy did everything "wrong" based on conventional wisdom
  • Peter has developed "trading nihilism" -- process doesn't matter [another smart comment]
  • His firm bought the Flash Crash, risked the firm, risked everything, best day ever. Skill or luck? Was it wrong? 
  • No mathematical framework in trading that you have in poker
  • The market never repeats itself like a poker or blackjack hand does [yes, exactly]
  • Throwing the book out from time to time, not following your rules, it's all guts and intuition
  • Some people just have conviction, don't care about price action
  • He was consistently profitable at first, but made no money [just like "winning" with tight, passive poker play]
  • He's a very emotional person, but makes emotion work for him
  • Feels the fire and allows his greed to take over -- results in best or worst days
  • Fannie Mae his biggest loss ever, most popular blog post
  • Shorted AVXL, one of his best trades ever
  • When he loses money, he wants to sleep in the next day
  • When the wheels fall off, self-doubt creeps in, needs to take a break
  • Has had worries that he'll never trade again
  • October 2016 the worst month in an otherwise good year
  • Can't get out in these microcap stocks, you get stuck, 1x loss become 3x loss
  • Built muscle memory for trading certain stocks, which betrayed him when trading OTC stocks
  • Lived in NYC for four years, 26 yo now
  • Used to keep detailed journal, made detailed plans, did detailed trading reviews -- now he's relaxed, doesn't do any of this, just wings it [sounds familiar]
  • Try less hard, take the pressure off yourself
  • Trading is not easy, markets constantly changing
  • Thoughts on trading BitCoin: insane volume and volatility, psychology same as crazy stocks
  • Exchange security is everything, you get hacked and lose everything, you're just not safe
  • Multiple exchanges with multiple rules, none of them have good infrastructure and security and no oversight, don't get involved with this, way too risky
  • peterkto.blogspot.com
  • Twitter: @peterkto