Notes for Chat with Traders, Episode 29

Added on by C. Maoxian.

Episode 29 ... Brian Shannon (63:13)

  • As a kid, watched Wall Street Week with his doctor Dad on Friday nights
  • Made money as a kid from caddying and delivering newspapers
  • First stock he ever bought was LoJack, made $6,000, hooked him for life, "why work?"
  • Grew up in Massachusetts?
  • First job after college as a stockbroker
  • Passed Series 7, realized job was glorified telemarketer
  • Went to Lehman Brothers next and learned how to sell
  • Learned how markets worked using other people's money
  • Read the Cabot Market Letter, idea was buying above levels of resistance
  • Read Investors Business Daily, saw prop firm ad that offered 20:1 leverage
  • Made $25,000 deposit with this prop firm
  • Excited with his 48K baud modem trading from his home's basement for the firm
  • Opened office for this NYC-based prop firm in Denver
  • Prop firm made money from commissions
  • People are their own worst enemies in the market
  • Still astounded by dumb decisions he makes even today
  • Chantal Pharmaceuticals, miracle skin cream, stock got halted after hit piece in Barron's
  • Lost $8-$12K overnight in Chantal Pharma ... one lesson he learned along the way, position with too much size
  • In 2000, 2001 market was getting crushed and he was losing pretty consistently, thought about quitting
  • Slowed things down, reduced size dramatically, ground his way back
  • His first six or seven months, he was profitable every month, then he got cocky
  • Trading is an evolution, you always come back to the basic principles
  • "Only price pays. Follow the trend" -- these are his catchphrases
  • Hold yourself accountable, don't blame other things, only yourself
  • Uses multiple time frames
  • Swing trading his preferred time frame
  • Looks at direction of 50-day moving average: uptrend or downtrend
  • Looks for volatility contraction, diminished volume, pullbacks to "support" on daily chart
  • Drops to 30-minute chart next, looks at 5-day moving average on 30-min chart
  • Distance from entry to his initial protective stop, distance to perceived targets measured -- figures his risk : reward
  • Drops to 10-minute chart, looks for an entry that makes sense given all of the above analysis
  • Don't gamble on earnings plays
  • Accountants lie, CEOs lie, only price pays
  • Ego and the need to be right clouds your judgment
  • Fan of using Volume Weighted Average Price -- VWAP -- esp. since some specific event (e.g., the IPO date)
  • Been looking at VWAP for 12 or 13 years
  • Stumbled across VWAP, it spoke to him ... now becoming more widely used by retail traders
  • Stan Weinstein's book, Secrets For Profiting in Bull and Bear Markets, had a huge influence on him
  • "If they don't scare you out, they'll wear you out"
  • Traders tend to be ADD looking for action
  • Time frame must suit your personality ... how much time, capital, and experience do you have?
  • Never start off by day trading, that's something you evolve to, or devolve to [chuckling]
  • Start off with a longer term horizon, like swing trading
  • Swing traders should make more money than day traders
  • Trading is extremely difficult ... anyone who says it's easy is lying ... misleading you for nefarious reasons
  • You need a lot of capital to start
  • People get impatient, make big mistakes before they learn who they are
  • First master yourself (understand yourself and which time frame suits you)
  • Brian says some nice things to Aaron in parting ... Aaron not as polished in these early episodes
  • www.alphatrends.net
  • His book: Technical Analysis Using Multiple Timeframes
  • Twitter: @alphatrends

Notes for Chat with Traders, Episode 66

Added on by C. Maoxian.

Episode 66 ... Dan Shapiro (66:25)

  • Return guest (Episode 32)
  • First started looking at charts in 2003
  • Fast talker, native New Yorker? ... sounds remarkably like Joe Fahmy
  • Looks at 60 minute charts exclusively
  • Social media the best and worst thing for new traders
  • Most new day traders obsess over the one minute chart
  • Uneducated, underfunded, no-process bungee jumpers are down on the one minute chart
  • "Barry Sanders Effect" -- getting stopped for two yards twenty times a day -->
  • Instead you should wait for a hole to open up, run 60 yards
  • Most stocks are not tradable
  • Get rid of the social media noise
  • He's "not the sharpest tool in the shed" [sounds pretty sharp to me]
  • He's been trading since 1999, has a lot of screen time
  • Netflix and Tesla his two favorite stocks
  • Hasn't updated his eSignal in at least a decade
  • His charts are covered with squiggly lines: moving averages, Bollinger Bands, linear regression lines
  • You need to know where the bodies are buried (areas of supply)
  • Most traders don't know what they're being patient for 
  • [Likes to use football analogies]
  • Stocks go from supply to supply (areas of support / resistance)
  • FANG (Facebook, Apple, (Amazon?), Netflix, Google) names are market sensitive -- is Netflix weak when the market is strong? Why?
  • Don't win the day, win the intervals of the chart
  • Is the trade worth it? Distance from one zone to the next large enough?
  • FANG stocks have great range and volume ... tradable [i.e., Usual Suspects]
  • Six years ago started doing live webinars
  • Looks through 500 daily charts every night, finds things "coming out of a range"
  • Writes down six to ten ideas every day
  • He'd rather drink cyanide than trade the pre-market highs and lows lists
  • Everybody wants to drive that fast car, but new drivers should drive slowly
  • Newborn babies don't come out of the womb running
  • How many horror stories are there of people shorting a pre-market screamer ("Flying Pig") and busting out
  • Trading should be boring
  • Watching six candles a day (60 minute charts) forces you to be patient 
  • Doesn't want to be fighting a guy with a $2,000 account who is getting stopped out every two minutes
  • Traders have to be humble but also killers, willing to take food out of some other guy's kids' mouths
  • Don't turn a paper cut into a severed head
  • [He's a fun guy, fast talker, should be in sales, maybe he was, maybe he still is]
  • During monthly review, looks hardest at his losing days
  • "Don't trade like a putz" -- spot those days you were trading like a putz
  • "Ish happens" [instead of "shit happens" ... a Yiddish thing?]
  • Advice to new traders: don't be undercapitalized (and max risk should be 1% of account)
  • Trades only have three parts: process [method], tier size [risk management], result [trade management]
  • Don't risk $1000 to make $300
  • "Let me give you the reality"
  • Prop firms used to make so much money from commissions, they didn't care about how much risk people were taking
  • Only four or five major players left in the prop business ... it's dead
  • Game has completely changed -- no money left in commissions
  • The money isn't in commissions anymore, it's in "education" 
  • Prop firms won't give you any capital now, won't let you trade any more than 100 share lots
  • Offshore prop firms are bookies 
  • Avoiding "Pattern Day Trader" rule by going offshore to a "bookie" broker a bad idea
  • What's a good amount of money to start trading: A LOT
  • "You, my friend, are a commodity"
  • If you're doing millions of shares a month, you can negotiate a very low commission rate
  • "You are the rising star ... invest in youself."
  • Peter Luger doesn't serve his steaks on paper plates
  • You need screen time to learn what NOT to do, not what to do [yes, indeed]
  • Borrowed money from a loan shark to get his start [I'd like to hear more about this]
  • In 2003 he was at Spectrum Securities, bought out by Schonfeld Securities, met Dan Mirkin then
  • In 2003 he started using Trade-Ideas [should have Dan Mirkin on the show]
  • Trade-Ideas still cheap at $500 a month [it isn't that much]
  • He doesn't upgrade anything he uses, 2003 version of Trade-Ideas, ancient version of eSignal
  • Turned profitable after 2003, a coincidence with Trade-Ideas adoption?
  • Many years of desperate trial and error before he found success
  • Has no need to show off, hates the social media circus
  • You need to put in the time to learn how to trade ... people will doubt you and you will doubt yourself, but don't give up
  • "Some random avatar isn't a superstar, you are the superstar"
  • How does he have this level of energy? Lots of cocaine [he's a funny guy]
  • www.accessatrader.com
  • Twitter: danshep55

You Were Sweet To Offer Your Hand

Added on by C. Maoxian.

Lots of recordings of this great song, but I like Helen Merrill's version best (with Clifford Brown on trumpet). She comes closest to capturing the crazy ex-lover thing ... the sort of shriek at 1:30, amazing stuff. No hugs, I understand. 

Notes for Chat with Traders, Episode 11

Added on by C. Maoxian.

Episode 11 ... Zach Hurwitz (123:31)

  • 10 AM to Noon, no calls, no appointments for Zach
  • Tufts, class of 2008, transitioned from English major to Econ major
  • Started trading during a volatile time
  • 2008, 2009, 2010 ... algos began impacting the markets
  • Retail guys need both screen time and coding time
  • Lost all his initial trading stake in six weeks in 2008
  • Had a visceral connection with chart patterns
  • Two classes that helped him with trading: AP English and Drama
  • In 2010 introduced to quant trader, "David," randomly met 
  • Lives in Ohio, middle of nowhere, just got lucky meeting "David"
  • His analyst says "trust the process" [Zach goes to psychotherapy?]
  • [Zach tends to ramble on at length, but he's likable....]
  • David tip: some days you have to be the mouse (detail oriented), some days the eagle (visionary), some days the donkey (do grunt work)
  • No trader wants to admit he's a beginner
  • Non-traders think day trading is glamorous, but they're wrong
  • Trading is "quiet, lonely struggle ... and it's hard" [I like it]
  • Poisonous self-talk during dark hours of trading 
  • A trader is the boss, the employee and the janitor, all in one
  • Have to learn to identify when you are being ridiculous
  • You can't learn to trade if you can't spend 40 hours a week on it
  • Risk management, position sizing ... these can be learned
  • Trading psychology, controlling yourself, is the thing you can't really learn
  • Step one is being honest with yourself
  • A trading coach is not a cheerleader
  • We are in charge of deceiving ourselves
  • Spending 20 hours a day six days a week to make $40K (40% on 100K), you feel like a jerk
  • VWAP is his holy grail, the thing that made sense to him, would have quit in 2011 if he hadn't found it
  • Zach is 28 years old now
  • Zerohedge and Brian Shannon of Alphatrends turned him on to VWAP
  • VWAP was available on the ThinkOrSwim platform so he could explore it
  • VWAP -- Volume Weighted Average Price ... like the ultimate "moving average"
  • VWAP originally built to benchmark execution quality
  • All indicators are arbitrary
  • ["Let me go off on a little tangent here...."]
  • Chat with Traders podcast is a killer resource
  • It's easier to learn from watching a developing athlete, not a pro
  • Good traders like good athletes, they make it look easy
  • VWAP looks like a moving average and acts like a pivot
  • VWAP responsive in a morning, dull in middle of the day, then picks up again at end of day (because it's volume weighted :) )
  • VWAP gives you your bias for the day
  • ["Forgive me for the meandering and tangentials..."]
  • VWAP will lead you to trade the most liquid names
  • People who want to trade stocks "in play" should be slapped in the face [who, moi?]
  • Mentions Mitch Hedberg ... Zach sounds a bit like a non-stoned Mitch, no?
  • Most people fly around as an eagle, spend a minute as a mouse, and never get around to being the donkey
  • VWAP best for intraday, mega-cap traders
  • Zach is now a systematic trade, no longer discretionary
  • Trading is lonely and difficult, it's invaluable to have a trading comrade
  • ["I'll turn this into a four hour podcast!"]
  • Not much good, free VWAP information out there ... not many people using it every day
  • Brian Shannon is excellent, a wonderful educator, and a nice guy
  • Zach uses ThinkOrSwim, likes it, but is not paid for referrals ... just use the demo account
  • Your family and friends will think you are just playing video games, but day trading is incredibly hard, needs to be respected
  • "You're clicking buttons just like every other schmo out there"
  • Most people don't pay attention -- they don't pay attention to others, themselves or the market
  • Give up on your unrealistic dreams of the Bugatti ... focus on your realistic dreams
  • Stop worrying about where you enter a trade, just get in if you think it's going higher
  • He uses shorter term 14 period RSI in conjunction with VWAP, but only for confirmation
  • You want a consistent approach
  • You want to take what you know works, and have it put into code
  • finviz dot com has a good filter ... start there
  • ThinkOrSwim has great beginning coding language
  • If an English major like him can learn to code, so can you
  • Ten years ago you'd have to know MatLab, not so today, barriers to entry have fallen
  • If you think everything is going to fall into your lap, you're going to blow up
  • Failing traders have not mastered even one thing, they bounce around
  • Trading is a predatory business ... you're a baby duckling and there are hawks out there
  • Find earnest, honest, real people to talk to about trading [I know of one or two on Twitter]
  • You don't want to be a jack of all trades, master of none
  • "If you want to be here for the good days, you have to be here for all the days" -- Ben Lichtenstein
  • Discretionary traders are all bald ... they drive themselves crazy
  • Recommends Reminiscences of a Stock Operator, all the Market Wizards books
  • "I'm not just trying to blow smoke up your skirt" [when singing Aaron's praises]
  • Make your eagle vision a reality by being the mouse and donkey
  • Are you life-changing rich by quadrupling your account? No, so stop trying to do that
  • Lower the stakes for yourself !
  • Nobody is your overseer as a trader ... you have to control yourself
  • More traders collapse mentally than financially
  • "You choose your tuition in the market" 
  • When you don't feel bad about losing trades, you've won
  • Don't make it harder on yourself than it has to be
  • ["Thank you for indulging my meandering ... babbling for two hours"]
  • Twitter: @ZachHurwitz

Take a Dive Off River Street

Added on by C. Maoxian.

I'm a sucker for this kind of harmonizing, but these pretty white brothers have a great sound ... a dark song for sure, but only if you listen to the lyrics: 

Notes for Chat with Traders, Episode 58

Added on by C. Maoxian.

Episode 58 ... Paul Singh (54:01)

  • Started trading in college
  • 40 years old now
  • Went to law school in 1990s
  • Took $5,000 to $200,000 during dot com boom
  • Worst time to learn how to trade since you could just blindly buy and make money
  • $200,000 went to zero in the dot com bust
  • Blew up another $5,000 account a little later
  • Third attempt in 2004, 2005 with $5,000 ... things started to click, he got more serious
  • Have to persevere ... helps if you love it ... never give up
  • Working as a lawyer then
  • Commodities boom next to play ... recognized it from dot com boom experience
  • 2011 started trading full time, stopped lawyering
  • Waited until he had enough money, patiently built a large stake, before he went full time
  • His wife works, she has a good job, they had a lot of savings, good safety net
  • Needed mid six figures as trading stake to be comfortable going full time
  • Biggest mistake people make is trying to trade without a proper trading stake
  • Don't give up your paycheck until you have built a significant trading stake
  • Can never be worried about daily expenses when you're trading
  • Take the amount you think you need to be comfortable trading full time and double it
  • Trading full time is boring, esp. swing trading (holding several days to several months)
  • Have to prevent yourself from "filling your day" by watching every tick
  • Swing trading all about after-hours homework, market hours just about executing the trade
  • Trading is more than stock picking
  • Three parts to trading:
  1. Stock picking the least important part,
  2. Risk management, which is fairly easy,
  3. Trade management, which is the hard part
  • Risk management is understanding probability and risk versus reward
  • Trade management separates winning and losing traders -- the psychological game
  • Trade management is where you need to work really hard, controlling emotions
  • Lightbulb moment: doesn't matter what stock you pick, with proper risk and trade management, can be profitable
  • Has basket of 10 to 15 set-ups he trades regularly
  • Pays close attention to money flow across broad market and sectors
  • Doesn't have a favorite set-up 
  • Whatever is working today is his favorite set-up, have to be adaptable
  • Set-ups stop working
  • Breakouts, breakout-pullbacks, moving averages, re-mounts -- fall in and out of usefulness
  • He exclusively trades stocks -- have to master one domain
  • Used to do options, futures, etc. but has dropped all that ... just stocks now
  • Hated to have to trade around the clock ... likes defined hours of stocks
  • Got interested in pre-market trading
  • The more experience you have, the fewer indicators you use
  • Experts learn to simplify, tune things out
  • New painters paint lots of lines ... not true of experienced painters
  • "Set it and forget it" -- don't micromanage positions
  • Don't watch every tick, don't switch up timeframes and see "new" things
  • Day trading gets his mind off his swing trading
  • Easier to part-time swing trade than full-time swing trade since mind occupied elsewhere
  • Taking a quick profit is human nature, hardwired, but the antithesis of good trading
  • You can't be a successful trader with 1:1 risk reward
  • First thing he does is a market analysis, looking for market leaders
  • Focuses on money flows across sectors
  • Builds watchlist of 50-150 stocks to stalk
  • Tries to narrow it down to 5-15 stocks in the evening or morning
  • Then writes a plan for each stock: entry range, stop range, target range -- in Evernote
  • Sizes positons based on those levels in advance
  • Doing position sizing in advance makes it so he has no anxiety, just pulls trigger given plan
  • Common mistake traders make is not taking into account the natural volatility of a stock
  • [They set their stops too tight]
  • Bad idea to place stops at obvious support and resistance, everyone is there ... it will be run
  • Take smaller position to be able to hold through stop gunning, then add once the stop gunning has passed
  • Used to look at ATR and volatility measures for stop placement, but now just eyeballs it
  • Pattern recognition comes after time, have to put in the hours
  • "John Tudor Jones" ;-)
  • His wife can't tell if he's had a winning or losing day [she must be an angel]
  • People have goals without a plan 
  • Focus on one thing and master it
  • Gets up at 4AM (lives on west coast)
  • Does a detailed monthly review of his trades
  • www.bullsonwallstreet.com
  • themarketspeculator.blogspot.com
  • www.pauljsingh.com
  • Twitter: @PaulJSingh