Notes for Chat with Traders, Episode 46

Added on by C. Maoxian.

Episode 46 ... Hans Dederle (46:39)

[Can't tell if this guy really makes any money?]

  • Worked for accounting firm doing tax prep, quit
  • Joined brokerage firm, got series 7
  • Got interested in trading off of earnings reports
  • "So to speak...."
  • Started trading a couple months before the 2008 peak
  • Blew up his account a couple of times [doesn't give details]
  • Boredom traded, revenge traded, averaged down, blew up
  • Had eleven months of trading profits, friends and family wanted to give him money [11 month track record?]
  • Managing other people's money, he's less emotional, more professional
  • For his style, high volatility stocks the only way to go
  • Looks for reversals in the first thirty minutes of the day
  • Don't try to beat the market makers, join them
  • Uses five minute candlesticks, finds support on gaps down, resistance on gaps up
  • Trades one to three things a day
  • Looks for extreme volume in individual stocks
  • Buys calls and puts, not the actual stock [how does he price them?]
  • Also looks at Level 2 
  • Commissions will eat up your profits if you overtrade
  • Trails a stop on his option positions [market liquid enough to do this??]
  • Holds positions usually one to five minutes [what?!?]
  • Tries to set entry and target with every position
  • Done by 10:30 AM every day, never swings anything
  • Trades NFLX and AMZN all the time
  • "For me, ...."
  • Don't confuse yourself with too many indicators, keep it simple
  • Uses RSI (lagging) to judge extreme moves
  • You need a system to stay disciplined
  • "Fail your way to success" [Zen koan?]
  • Don't think about the money, think about staying true to your strategy
  • Has tweaked his strategy all along, adapted to changing markets
  • Paper traded his strategy for six months to fine-tune and gain confidence
  • "Hold and hope" instead of stopping out -- deadly
  • Everyone in the beginning cuts her profits short and lets her losses run, it's only natural
  • Figure out what works for you
  • Twitter: @Hdederle

Notes for Chat with Traders, Episode 48

Added on by C. Maoxian.

[I've always liked Linda Raschke ... she's the real deal and every word is gold. You should seek out everything she has ever written and recorded]

Episode 48 ... Linda Raschke (49:29)

  • 1981, started as equity options trader on the floor
  • Barriers to entry minuscule today compared with the past when she started
  • Once you find the key, they change the lock
  • Must learn to adapt
  • What works for someone else might not work for you
  • Still learns something new every day
  • After ten years of trading, she felt confident with her plan
  • You can't go and copy another trader
  • Have to move to markets where there's volume and volatility 
  • Many markets she used to trade no longer exist (pork bellies, OEX options, etc.)
  • Markets either go up or down
  • Don't force anything
  • Like tennis, keep the ball in play until you see an opening
  • The big money is made holding overnight, which is riskier
  • Don't use linear framework to approach the market
  • Wyckoff ideas of range contraction and tests and re-tests still good
  • Look for strong volume, strong directional bias 
  • Lethal to trade in the middle of a range
  • Trade location irrelevant if you're getting on a trend
  • Market moves now efficient, instantly goes to new equilibrium level
  • Look at price, not derivatives of price, like oscillators
  • Always check liquidity first ... can you get out quickly?
  • Intuition just the sum of experience, she's not a fan of intuition
  • Every time she's had a hunch, she's been wrong as often as right
  • Need a very consistent approach or framework to the market
  • Prepares the night before, has a game plan, comes in next morning ready to go
  • 80% of your profits come from 10% of your trades
  • Don't scramble in the morning to get prepared, do it the night before
  • You need to concentrate and focus, don't get distracted by Twitter and TV, shut out the noise
  • Take anybody else's opinion with a grain of salt
  • Most "educators" couldn't trade their way out of a paper bag
  • Anyone who trades well doesn't teach anybody else how to trade, it's a bottom-line business
  • Find your own style, do your own work
  • Print out charts and make a notebook, study action that preceded big moves
  • Gann was demented at the end, suffering from syphilis
  • Concentrate on one initial pattern and study it: a breakout thing, or a retracement in direction of trend
  • Keep track of your performance statistics, turn it into a game
  • Free yourself from ego, rid yourself of the need to call turns
  • Imagine yourself standing on your surfboard alone in the ocean waiting for the great wave
  • People think trading is easy, want to follow a guru -- they're doing it wrong
  • Every successful trader has found one little thing that works for her, and does it consistently
  • Has a website but neglects it
  • Look for YouTube videos of her ... all free! (5,210 results)

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