Wednesday, June 28, 2017

Changes

Do you ever find yourself struggling to change?

Of course you do. Because you're human.

No matter what good intentions, you make the wrong choice.

Just one sip of beer at the party, who cares.

Just skip today's workout and have a cheeseburger, who cares.

Sometimes it's trivial, sometimes your career or marriage depends on it, sometimes it's the difference between life and death...change is hard.

I make all these bullshit trades and luckily most of them never get too far because I come to my senses and weasel my way out of it, or I enter with very low risk. And maybe enough of them actually kinda-sorta work out and I control my fees well enough that the long-run expectation of these trades that I categorize as total bullshit gets close to 0. So maybe it's not so bad, it's not costing me that much.

Or is it?

Maybe it would matter more to me if it was the difference between winning and losing. But because I'm still a profitable trader overall, I have no sense of urgency whatsoever.

A small fraction of my best days are just endless bullshit trading followed by recognizing an actual good trade and trading it on a much higher risk level, so not only can I eliminate the losses but also take home a worthwhile profit for all the stress. It's the thrill of digging your own hole and escaping to tell the tale. I admit it's terrible and that I'm terrible and consequentially, I often feel I don't deserve the money that I work so hard for.

It keeps going.

Just a few moments ago I closed out a bullshit trade for a trivial loss that I'll probably forget about in a couple hours.

I entered at a price that wasn't valid for how I want to structure my entries and I stopped out at a price that didn't make sense either. I just did it because... well, why not? what if it works and I'm not in it?

Spoiler alert, it didn't work out.

Now there's this nagging discomfort that's sitting with me. I try to cope with the feeling by telling myself "it's not that much money, I'm still up on the day." This is a script I've been replaying over and over for my entire trading career.

Deep down, I'm anguishing... asking myself... why... why did you do that? What was the point?

Every now and then, it boils over: you know what... fuck you. You piece of shit, what the fuck do you think you're doing? I'M OUT. Then I shut everything off and kick a wall or a bedpost like a petulant child.

This deeply unhealthy internal monologue has become normal and routine for the last 6 years of my life.

At first, I could chalk it up to ignorance and inexperience. I didn't know what change I wanted to make. Now I actually see what I really want to accomplish and what I want to avoid. I just can't execute.

This is an inability to change. And I've just quietly accepted it.

I'm still doing this shit. I just did it again.

I'm not stopping. Probably.

"Today I'll be patient", "today I'll do things right", but that's all talk and you know it and I know it.

As long as I'm still making money overall, who cares.

Here's a dirty little secret I learned awhile back: the more money I make, the unhappier I am. That nagging discomfort after every single decision I make--whether it be winning trades or losing trades--just becomes magnified 100x when trading at a high risk level. Winning does not cure all. My psyche is just permanently locked in on self-loathing mode.

I'm starting to realize you can't win this game just by making money.

I hate writing out cliches, I can't stand trading blogs and twitter trading accounts that just spew trading cliche bullshit, and this is absolutely 100% going to sound like trading cliche bullshit but here goes:

How do you really win at this game, Peter?

You win this game with the right mindset.

Ugh, let me clean out the bile from my mouth and expand...

Win or lose, no matter what, you're fine. It's not a big deal

Supreme confidence and poise, not just after a nice winning streak, but maintained every single day because you know you can make the right choices every time.

How much is it worth to me to truly be the master of my own domain? If I could just say no to a bullshit trade and accept the result every time?  I can only imagine. Probably worth a lot more than the bullshit $100 trade I'm considering an entry on.

Now excuse me, I'm going to go back to trading like an asshole, thank you very much.

Tuesday, March 14, 2017

The Trade That Made No Sense



We were were in agreement that we had to find a better way.

Clockwork and I started our trading careers as  professional minimum wage traders. We meticulously manufactured small profits--all amounting to a low payout that, after being chewed up by commissions, profit split, platform fees, and the occasional compliance fine, would fail to sustain even a mediocre life quality in high-priced NYC.

Every day, we would trade with the same bullshit trading piker mindset.

 We would look for tight consolidation patterns, squint at the level II for a large order that could be our exit to reduce slippage, buy the first tick-up with a tight stop, and hurriedly try to sell it for 10 cents. 

Yeah 10 cents. Why so little?

Well, every time a winning trade came back to our entry--which was literally every time it felt like--we would experience immense regret that we didn't sell it. Because we "knew" it would happen.

"Welp, looks like they're gonna run the stops again."


We had trapped ourselves psychologically. Taking mediocre ideas and trying to take mediocre profits before the trade proved its true colors--that it was a mediocre trade with little chance to form the sustained, powerful trend that's worthy of holding. Our only saving virtue, one that would ensure profitability, was being too cynical to believe in our own trades--because being patient and riding a winning trade was a sucker's game. Something they wrote about in trading psychology books from 20 years ago before the HFT's made the market too annoying to trade.

I joked about going to law school. He joked about getting an MBA. Enough was enough...  this was the final straw. If you don't make real money in a risk-taker's job, you might as well just quit and get a real job. And if you're about to quit, you might as well empty all the bullets and see what happens (especially on someone else's dime).

"Let's trade bigger and if we blow up, we blow up. Who cares at this point?"

We had a clock in our heads at this point--now or never to make this trading pipe dream a reality.

But we agreed the solution wouldn't be to increase size with our current piker bullshit trading strategies.

We needed to find scale-able strategies where we could hold positions with both size and conviction.

The type of strategy that would make us real money, the type of money that attracted us to trading in the first place.

First, we needed better...

...Role Models.

Slow Trot was one of the best traders from Crazy Capital Group. He had been trading for 14 years. He wore shorts, flip-flops, and an old raggedy t-shirt. He spoke with a slight Texan 'twang in his voice. He took his seat at the bar and ordered all of us a drink. We wanted to pick his brain. 

Slow Trot  told us about all the weird shit that guys at Branch B would do to make money. It was a whole different world outside of the repackaged vanilla technical strategies that over-saturated trading education circles.

Secret sauce trading strategies that included:
  • Buying thinly-traded ETN/ETF when they were mispriced from their NAV on price spikes
  • Preferred stock and warrant arbitrage
  • Trading the opening and closing imbalances
  • Having huge in positions in stocks I've never heard of, stocks that barely traded 10k shares a day
  • Exploiting an odd-lot algorithm glitch on shares of BRK.A when it was priced in the 100,000s
Slow Trot told us about the day the entire firm bought stocks during the flash crash. Their attitude stuck with me:

"It was someone else's money."

Copycat Trading

We decided to model ourselves after the best traders at the firm. 

Lucky for us, our firm implemented a new link-up system where we could see the real-time risk monitor, including all positions and respective PnL, of the best traders at the firm (provided they agree to a link-up).

I recorded their best and biggest trades on a daily basis, to see if there was something I could learn from the pro's.

One particular ticker caught my eye: AEPI

For one week, I noticed that every day Slow Trot and his buddies would be shorting AEPI Industries a few minutes before the close and covering afterhours for a profit.


AEPI: Chemical company. Thinly traded -- at most 200-300k in volume on a "highly traded" day. Never heard of them in either real life or the circles of FinTweet. Yet the most highly profitable ticker for the firm for the past month.

I couldn't understand what the edge was on the trade. Who is giving this money away?! This wasn't a day trade. Position trade. Technical trade. Fundamental trade. Trend trade. Mean reversion trade. Scalp. None of those labels could aptly describe what was going on here. AEPI was a mystery box that I couldn't wrack my head around. For starters, it made absolutely zero sense how all of these traders could close their positions at reasonable prices during the afterhours market (when there is "supposed" to be far less liquidity and very wide bid/ask  spreads), let alone why the stock would move at all afterhours with no news. 

The AEPI trade was more a weird phenomenon or glitch that kept repeating, over and over and over again.

The stock would trade close to half of its daily volume in one 5 minute bar from 4:00 to 4:05 and always trade in the same direction. DOWN. It never upticked, not even once.

And traders were making money hand over fist betting that it would keep repeating itself. They made their entire week/month on one pain-free trade that lasted a few minutes while pikers like myself would grind all day to pay the bills.



There was no explanation from anyone as to why it would work.

To exacerbate my FOMO (fear of missing out), new traders on the desk started joining the trade, with no better an understanding on what was going, and would reap the rewards.

I had a voice of reason telling me "don't take risk on something you don't understand". Then I told that voice to cram it. I thought about some of the strategies that the top guys used. Did they truly understand their edge at every micro detail level? Not really. They just did what worked. I had to turn off my brain and leave the skepticism at home. This was free money and I just didn't know why yet.

The Next Day

Do I even have to tell you what we did next? There was only one logical course of action.



We saw Slow Trot get into the trade a few minutes before the close. We jammed into it as well.

Then we waited, in great anticipation.




Funny thing happened: the stock upticked.


Our positions were immediately out of the money.




Faced with paying up a big one point spread to take a loss, we chose to keep holding.

Then we saw the "pro traders" add to their positions so again, we just followed along and did what they did.

This was definitely going to end well.


The Day After That

The next day we hoped it would just stop and let us minimize our damage. Okay, the glitch stopped working but that doesn't mean there's reason for the stock to move up right?

At the open, our hopes were dashed. AEPI refused to slow down.

Our max-loss limits were triggered on the open and the firm liquidated our positions.

It was my worst loss of the year. It wiped out the last 3 months of hard earned piker trading profits. The firm as a whole took quite a beating.

They say the best trades have 3 phases:
Innovators.
Imitators.
...and Idiots.

And once the idiots hop on the bandwagon, the trade gets over-crowded and stops working.

Even though I don't know why the trade ever started working in the first place, I at least know why it stopped working.

Aftermath

To this day, I still have no idea what was going on in AEPI. I have many questions.

1) How did someone find out about it?
2) Why did this trade have an edge?
3) Why did it stop working?
4) Was this a case of a trader knowing something but not wanting to spell it out for legality reasons?
5) How was everyone else so willing to hop onto a trade that seemingly had no clear logical explanation for why it worked?

There's a lesson here about not getting into trades you don't understand, but I didn't start this blog to impart wise lessons. I'm just an idiot.

Sunday, February 12, 2017

Stepper!

The Firm Next Door


There was another prop firm sharing the building floor with us. Let's call them Lemmings Capital.

Lemmings Capital was a small outfit run by a rotund bear-bodied Russian, Ivan, and Bob, a balding, bespectacled man who always sported an worn-out adjustable cap. Supposedly, they were both "traders back in the day" i.e. the SOES bandits era. I would pass by both of them in the common areas frequently, but never make eye contact nor acknowledge them in any way. Maybe it was because the memory of ease-dropping on a conversation my head trader had about those two where he remarked,

"I don't know how those two sleep at night." 

It was always different faces shuffling into Lemmings Capital around 8am in the morning. Mostly young recent college graduates, many of whom English was not their first language. Some majored in the humanities. Others did social sciences or communications. One of them pursued a theater degree. Not sure if anyone with an actual finance background ever traded there. You wouldn't see the same face for longer than a month, but you'd see the same familiar expression. Fresh out of school. Deer-in-the-headlights. Clueless. 

One slow summer trading day, many traders were out in the kitchen to watch Euro 2012 on ESPN. I made small talk with one of their traders, Billy, asking him about the strategies that his firm used. What was the training process like? What setups did they look for? What did their mentors instruct them to call out on the desk?

"Well, we look for steppers."

"Oh, what's a stepper?" I asked with eyebrows in-quizzically furrowed, trying to mask the smirk that would give away that I already knew the answer. 

It was an "advanced level II strategy", he told me. He proceeded to explain further.

"Stepper!"



A stepper refers to a large order, bid (ask) that steps up (down) in price. Say a stock like AAPL is normally showing between 100 to 1000 shares on the bid or ask. A slightly bigger order would be 5000-10000. An unusually huge order, worthy of the "STEPPER!" shoutout, would be 50,000 or greater.



This is supposed to be the "large buyer" or "whale". That's the guy you front run with your small piker buy order. It's first level logic -- a buyer with a lot of shares to buy must send the stock price up, right? You scoop up shares in front of it and see where he takes you. The stepper then "steps up" through the price in order to jockey for fills, rewarding any and all scalpers for their parasitic trading.

Traders at Lemmings Capital were instructed to look at liquid S&P 500 large caps for these large orders and then loudly call out "STEPPER" upon spotting one, so others can jump on, ride the wave, and get paid their two to five pennies a share. This was called teamwork, they were told. They'd be each other's eyes and ears. So everyone else can eat and pay their rent. Don't be silent, be noble and selfless.



These pikers were just getting in front of large orders with size and trying to make pennies, with their exit plan being to hit the big order when it started getting taken rapidly. It was pure, mindless order flow scalping in an environment where manual order flow scalping had basically been left for dead by the rise of HFT.

9/10 times, you would either lose a few pennies as the order failed to the move stock before being taken out, or make a few more pennies if you were fast and able to take advantage of the microscopic reaction. The gross profit or loss would barely make a dent. Traders were encouraged to trade max size to squeeze the most out of a tiny move. It's the small trading fees that would add up over time. Needless to say, Lemmings Capital did not have a high margin business plan.

That other 1 out of 10 times... well, you got fucked.



 The HFT algo would either yank the bid quickly and hit the remaining bids underneath or a seller would take out the bid in one shot, what Billy told me was called "one-printing". Then the rest of the bid side would thin out quickly. This would happen before anyone could react, trigger all the tight stop losses, and traders step on each other to panic out, exacerbating the severity of move by just a few more ticks for the next one out. Bob and Ivan taught their traders to be "be disciplined and always use a stop loss", so they always got out, no matter what.


A few minutes later, the stock would trade right back up to the original price where they had gotten in.

Agony. 

Lemmings Capital was another burn and churn firm profiting off the trading commissions rather than teach an edge and make money through a profit share. The firm required small deposits from new traders so they weren't really taking any risk in the first place. None of the poor souls had any clue what their (lack of) edge was.

Slowly but surely, every trader blew up their accounts, one algo-driven shakedown at a time.

Once your loss exceeded your deposit, Ivan would let you know you were being cut off. Then, I don't know, maybe you put your head down and start to cry because you failed.

Bob would take you out in the hallway, put a hand on your sullen shoulder--like an empathetic veteran manager consoling a pitcher who had just surrendered a crooked inning--and give you the good ol' pick-me-up speech.



"Brother, I've seen the progress you made, you are so close to making that breakthrough. This happens to every trader the first time around. You remind me of myself when I first started trading, that's the kind of special talent you have. You're selling yourself short if you quit now. Give trading another chance, I really believe you're one of the few who will make it."

Translation: Make another deposit with us.

Ivan and Bob spent more time conducting interviews than they did actually trading on their own desk. According to them, everyone was a special trading talent.

 I asked Billy if he made any money at all since he started. Not overall but just one profitable month, and if not even that, one profitable week?

"No, but I feel I'm close. It takes at least year to be profitable they said."

I think he left a month later to take the CFA or something like that.

Thursday, November 10, 2016

Podcast

https://chatwithtraders.com/ep-098-peter-to/

I recorded a podcast.  It's about trading and stuff. Thanks to Aaron for reaching out!

Friday, November 4, 2016

The Best Trade I Made in October

... was trading DeAndre Hopkins and Jeremy Hill for Dez Bryant in my $200 fantasy football league last week.

It was that kind of a trading month. 

9 months of hugging the highs of my equity curve and then the first prolonged dip.

It's becoming a pattern on this blog, every time I hit an iceberg, that's what the next post is all about--about how lost I feel and how it sucks and how I'll never, ever, ever make money again. 

1% drawdown? I need to take a day off, I can't handle it anymore.
3% drawdown? I want to quit trading forever.
5% drawdown?! Where's the cliff because I gotta jump off!

This is kind of how my equity curve and my day-to-day mood plays out.


So I'm kinda there right now.

I tried to trade and my mind wasn't having any of it. I was like a college freshman procrastinating on his 10 page civics essay. I obsess over the absolute least important tasks. Look up a ticker to see if I want to make a trade? Nah, nuts to that. I'm going to waste my time instead. I'm going to browse r/nba and watch this Joakim Noah jumpshot (if you can call it that) loop over and over again. 

Then I waste the rest of my day staring at my fantasy football team's roster to see how I can make it better.

That's what the rest of this post is about. Being petty, obsessive, and over-competitive about something that ultimately doesn't matter in the grand scheme of things--stupid, silly fantasy football. Because I'm bad at my job and I need something to help me distance myself from the pain of acknowledging this reality. Do yourself a favor and stop reading.


Long DEZ, Short NUK

So, a little background: I am co-manager for my buddy's west coast league. I don't know anyone in the league except him and he doesn't know anyone in the league except one friend--so we're complete outsiders. I have 100% control over the team because between the both of us, I'm the one who's the hardcore football fan. Despite a mediocre draft, good management and good scheduling luck had our record at 5-2 heading into week 8.

For the past few weeks, I've been anguishing over our team's low scoring ceiling because our 1st rounder, the guy who's supposed to be the anchor of our fantasy team, DeAndre 'Nuk'* Hopkins has the misfortune of having to play for the Houston Texans--a team measuring dead last in offensive DVOA. A bad offense means fewer touchdowns, and thus fewer fantasy points. Now, it's not Nuk's fault that his offense completely sucks. Nuk is a supremely talented All-Pro wide receiver who, quite frankly, deserves better. How can you be dead last in offense with this stud on your team? Certainly, someone was to blame... 
*it's pronounced Nuke

... I'll tell you: it's this guy.


Can't throw accurately 
Can't read the defense 
Turnover prone 
Actually somehow worse than perennial backup fodder such as Ryan Mallett, Brian Hoyer, TJ Yates and Brandon Weeden 
Makes me want to throw up when I watch him play 

As long as this stickly Robert Pattinson doppleganger was taking the snaps under center, Nuk was going to suffer. Doesn't matter how wide Nuk's catch radius is or how sticky his hands are, because if Suckweiler is out there slinging it, he'll throw it 10 yards short. I've seen Hall of Fame receivers languish in bad quarterback wasteland. 2006 Randy Moss. 2012 Larry Fitzgerald. There's just no sense in retaining false hope. Even with average quarterback play in 2015, Nuk Hopkins produced a sterling 1500+ yards and 11 touchdowns. 2016? On pace to finish with 868 yards and 6 touchdowns. His value was declining quickly and I had to unload him before everyone figured it out. I had to cut my loss.

I tried to trade Nuk for Odell Beckham Jr., another blue chipper who at the time was also underperforming (but who I thought would rebound). Declined. Mike Evans, a 2nd round receiver having a great year. Declined. It was clear I wasn't going to be able to make out like a bandit. I had to take a chance on a receiver with warts (but with the upside to make the risk-reward worth it) and hope it paid off.

For those unfamiliar with fantasy football, most leagues don't trade. A couple theories on why trades seldom close:
  • Everyone wants to win the trade. So a lot of trade proposals are just fishing for some button clicking amateur to accept. A fair trade is usually one where neither feels completely satisfied.
  • Most managers have an anchor bias to players they drafted, especially anyone in the top-3 rounds (the "studs" who collect the most points). So they're usually too slow to make the assessment that said player has lost value. No one wants to trade away a known superstar who might just be due and then see them breakout in the 2nd half, for a no-name waiver-wire hot performer who might cool off.

After going through everyone's roster three times over, I found the right trading partner. His team was 1-6; maybe he was desperate to make a move.  He had an under-performing marquee receiver who had his share of red flags, such as injury concern and QB chemistry. On top of that, said manager's roster had 3 other good receivers playing ahead. It was definitely a player who the manager might have felt detached from.

My target man? The mercurial Dez Bryant of the Dallas Cowboys. The Cowboys had the #1 offense in DVOA, the exact opposite end of the spectrum from the Texans. 2014 Dez was a touchdown machine on a great offense. 2016 Dez, coming off a knee injury, wasn't a sure thing. You didn't exactly hear the fantasy experts proclaiming a return to greatness for number 88. But I had to roll the dice on the chance that maybe, just maybe, he could tap into his gifts and perform like 2014 Dez again. His situation was certainly more favorable. Nuk's upside was capped out with Brock Lobster's shittiness--that I knew.

There had been zero trades in the league to this point. Knowing that and having had dozens of trade proposals rejected, I felt I had to sweeten the deal to close it. He didn't want to take DeAndre for Dez straight up. I looked at my bench and tossed in Bengals running back Jeremy Hill, who had just punched in his highest scoring week of the seasons against the lowly Cleveland Browns. I hated Jeremy Hill due to his week-to-week unpredictability and I had three RBs ahead of him and was thus dealing from a position of depth. If I waited for Dez to have a big game before proposing the trade, it would be too late. It was now or never.

I pulled the trigger. He quickly accepted. 

The Commissioner Speaks

Shortly after the trade completed, my pal relayed to me some group texts from the league commissioner. He was lobbying everyone in the league to veto the trade because it was (in his opinion) "unfair". I was shocked.

WHAT???? 

"How in the hell could this be unfair?" I thought. 

I wracked my mind around it again.  Both receivers have flaws. Dez was far from a sure thing, having missed 4 weeks of action. I had soured on Hopkins but he still carried big name value. There was a chance (like, if Brock got injured and the Texans signed Brett Favre or Peyton Manning, that kind of chance) he could rebound close to his 2015 numbers. On top of that, I gave him Jeremy Hill, a top-25 running back! C'mon, how you could possibly say I ripped the guy off? It was 100% fair.

Then I re-read the text.

Commissioner: Hopkins is a star receiver and Jeremy Hill just had a huge game. Nima's team* could be stacked in the playoffs now. Not fair to the rest of us. This should be vetoed.
*other guy in the trade

Oh.

He's saying I got ripped off.

He's saying that I made a trade so lopsided in value, against my own interests, that he felt compelled to intervene for the sake of the league's competitive balance and its sanctity.

He's saying that I'm a moron, basically. That's what he's saying.

Other league members chimed in. They actually agreed. Even one guy who didn't want to veto had said "I agree it was a little one sided but..." Everyone thought I was moron!

They managed to get their four veto's and the trade was reversed.

I was aghast. What's this stinging sensation I feel? Oh it's my pride. I can't even get a stupid fantasy football trade right? Is it possible that I don't know what I'm doing? Was this symbolic of a greater event in my life unraveling before my very eyes--the start of a perilous decline and the eventual demise of my trading career?

No, fuck that. I was right. They were wrong. I mentally and emotionally doubled down on my thesis. I was entrenched. These jackaloons just didn't have the requisite intelligence and mental agility to adjust their perception of value. They didn't see what I saw as a matter-of-fact biblical truth--how god-fucking-awful a quarterback Brock Osweiler is. He'd make prime Jerry Rice look like Freddie Mitchell. These donkey dipshits were too busy circle jerking each other over how the dumb the outsider must be. These knob gobblers had neither the vision to conceive forward-thinking trade ideas, nor the balls to do what it takes to close the deal. 

The commissioner's impassioned lobbying against the trade also inflamed my sense of right and wrong.

Who the fuck was he to think his perception of player value was superior to all others?
Who the fuck was he to think he can dictate what is fair among two competitive parties mutually agreeing to a transaction?
Who the fuck is he to think he should "protect" other members from their own choices?

Veto's should be used against clear collusion, and only that. To veto this trade was anti-capitalist and thus anti-American in spirit. I didn't know nor had contact with any of the other members. He elbowed his own brother into voting to veto. For shame!

Nima re-proposed the same trade and threw in a backup tight end that I didn't need (Martellus Bennett, who he was going to drop in order to complete the 2 for 1 deal). He was able to persuade some who voted to veto. The trade cleared 2 days later. The entire charade didn't matter but now my ego had skin in the game.

Sunday Morning

Sunday came around. I was matched against the league's first place team.

Dez would play against a top-5 defense while Nuk played against a bottom-5 defense. All the projections and expert rankings had Nuk higher. If there was a game for him to show he could retain value as an elite receiver, it had to be this one. He would finish with a grand total of...

6.4 points. Less than half his weekly projection.

Nuk, I love ya baby, but we couldn't keep going--not like this. It's not you, it's your quarterback.

Heading into the Sunday night primetime game, I trailed 14 points. His team was finished. I had one guy left on my roster. You can guess who it was.

The Moment of Truth
With three minutes left in the game, I needed a touchdown to win.

I needed the Cowboys to drive down the field and throw it to the right guy.

19.3 points. Vindication baby. Vindication.

me in the living room

Being the mature adult that I am, I then changed my team name to "Suck on Dez Nuts" and sent a bunch of lopsided trade proposals to the commissioner with unnecessary completely necessary, maybe-borderline-harassment, nasty taunting messages attached. Fuck him, that's why.

I felt so satisfied with myself. I had a thesis. I had conviction. I put in the research. I acknowledged the uncertainty but took the risk anyway. The doubters had their say--they thought I was an idiot. They were proven wrong. It fueled me. I'm a winner. I'm a fantasy genius. Even in a bad month, I can still find a good trade. 

Fuck you Navid. I've never met you but I think you're an asshole. Let teams make their own choices. SUCK ON THIS

Saturday, September 10, 2016

Reflections

It's been a year since my last blog post.

This is the cycle I've been going through:

"I should write another post. I have so many ideas!" --> Sit down to write... --> Go face to face with the toughest obstacle for any writer: lack of writing flow ---> give up

I decided to write a little bit about my trading year so far... something easy instead of getting stuck in trying to craft any bigger message

Random points and events made in bullet form, in no relevant order:

1) It's been a solid year. I'm 97% towards meeting my PnL goal (a number in my head that I had in January that I'd consider a "successful year"). If I continue on the same trajectory, I should double the profits I made in 2015. I'm not even sure how I got to this point.... certainly not by design or extraordinary effort. 

2) I started the year with zero confidence. I had stopped trading in in the middle of November until the end of the 2015 (my longest break in trading ever). I had an explosive start to November followed by giving back  half the profits in a short time period (my worst drawdown period of the year) and suddenly I just felt I couldn't do it anymore. I had reached my limits in disgust, guilt, self-pity, anguish-- whatever negative emotion a trader could feel. I just wanted out.

3) I had no real plan with my free time. There wasn't any training montage of a man beaten down dramatically getting up and declaring he will succeed--no prolonged period of setting goals, reviewing trading rules, reading more than ever, re-strategizing, and getting back in the game. I just did whatever I felt like. Sometimes that meant an entire day of watching TV, taking long naps, and eating fast food. Then repeating that day. I spent time with family. I'd work on my golf game. I did some online dating. I met a girl and fell in love. I had enough money to just do nothing for as long as I wanted.

4) December 2015 -- I opened my mailbox and saw a letter from the IRS. This can't be good.




Long story short, this was all because of postage error I made when sending my extension request in April.

Well shit, now I have to trade...

5) At the start of the year, I traded like a massive piker. My goal was simply to show up--and showing up means DON'T LOSE MONEY, because if you lose money--you stupid fucking idiot--you're gonna feel bad and you hate feeling bad so you stop showing up!

Just show up, don't lose, and at the end of the day, you'll be surprised...

Confidence and size picked up from there. Last year's up-and-down emotional experience started to pay off in terms of cueing me into what not to do. I didn't tilt trade as much. I protected myself from myself. If that meant shutting everything off (something I once abhorred as a weaksauce mental midget thing to do), that's what I would do.

6) Major changes in 2016: I went cold turkey on adderall. That cranked up BANG BANG LET'S GO feeling at 9:30? Gone for good after 4 years. My energy level dipped dramatically but my trading got steadier. I became a slower, less reactive trader. More of an intraday trader than a scalper. I like the results so far. One downside? It sucks to write without the juice. Capturing that old writing flow has become much more difficult.

7) Another change: I started treating my trading as a business. This was stuff I always intended to get around to but kept procrastinating on.
  • I started a corporate entity for tax purposes
  • I opened an IRA for longer-term investing
  • I bought a quality desktop computer (I had been trading off a laptop for the past 2 years)
  • I subscribed to a news feed (Benzinga)
  • I paid for a real-time stock filter (Trade Ideas)
  • I started renting a WeWork office
  • I got a corporate charge card to use for the above expenses and collect those sweet, sweet rewards points

8) I still have days where I feel like an irresponsible adolescent who wakes up in his PJ's and presses buttons rather than a thoughtful, calculated, business-like professional trader. It's that easy for me... to wake up and just make $1000 in 30 minutes, then enjoy the rest of my life. Thinking about horizons beyond can add a lot of anguish and disappointment. Why didn't I make more? Why don't I make more? Why do I lack the iron-will of other traders to just commit and do MORE? Will I ever fulfil my potential?

9) I trade with an on/off switch. I don't bring it every single day, probably not even most days. I'll make "enough" and call it a day. I'll have days where I completely intend to mail it in but something special draws my attention and I fire all my bullets and make a killing. The conscious thought of pushing myself is usually absent (there's a burden of responsibility that comes attached with these thoughts that I cannot handle) but sometimes it happens organically. I don't even know anymore.

10) Some thoughts on social media... I think there's a lot of great ideas and a lot to learn from other traders. I think it's great to refine a trader's ability to gauge sentiment and feel out the "trading herd". But it can be a toxic mix when emotions like FOMO and jealousy get involved. I hate any kind of cheerleading on my feed, even when it's coming from good traders who I personally like.

11) February 2016: I got another letter from the IRS. I sent them a letter asking for penalty abatement and they responded. I only had to pay a tiny fraction of the original amount. THANK GOD.

12) My favorite trade of the year: shorting CNR on a 200% price spike (due to ticker confusion on  Morgan Stanley upgrade of the Canadian CNR, a high priced railroad stock) when there was already an agreement that the stock would go private at $1.10. Why didn't I put all my buying power into that one?

13) I've had to do a lot of reflection on who I am at this point. I remember sitting in class in my final year of college, after I had committed to moving to New York. I was bored out of my mind and day dreaming about the future.

Peter To.
Living in the financial capital of the world.
Young gun in his 20s. Real hot shot. 
Hedge fund manager.
Nice tailored suits.
Runs 10 miles every day.
Works 80 hours a week.
Millionaire.
No, fuck that shit... billionaire!
Then I'll buy the Dodgers from that piece of shit Frank McCourt and we'll win the next 10 World Series titles with a gigantic payroll (note: someone else has executed that plan and it hasn't quite worked out that way)

All these grandiose visions. I thought I was better than everyone else around me because I had fire and ambition. Nobody would outwork me!

I could've been yet another trader on instagram posting all-text memes about hard work and hustle and photos of my bomb-ass house and ferrari, under the guise of "motivating" others.

Needless to say I'm not that person anymore... maybe I never was? I'm not sure what motivates me anymore. Finding that fuel has been elusive. I can't fool myself by posturing like I did before in my early 20's.

14) That being said, I live a charmed life. There's literally nothing bad in my life other than my penchant for self-inflicted negativity. I got a good thing going.

15) But if I can just get out of my own way, I'd make so much money. I mean, it's stupid that I don't try harder!

16) Ah fuck, stop it already.

Thursday, September 24, 2015

I suck at trading and lost some money recently.

I'm posting this short little note to try to make sure I actually follow through in finishign a new post today.

Long story short
I'm bleeding money like a dum-dum the past 3 trading days--a total loss of 9% of my year's net profits so far and the largest drawdown my personal account has ever endured. 

It sucks.

A big sum of the loss was from 2 weeks ago before I went on vacation. Then I came back and spewed some more 2 days ago. That was the "breakout day" for me, a new personal record for  "largest drawdown" point. I shut all my platforms off and decided to write to occupy the time and take my mind away from all the losing. I have a 5 paragraph draft in my folder just sitting there that I decided not to post because it's too angsty and melodramatic--I get uncomfortable when the tone of my writing gets too emotional.*
*We all feel like shit at one point or another when we trade. It's not that interesting in and of itself. Fucking a, even in a placeholder note that I'm going to delete anyway has a fucking footnote, I'm gonna stop

After I taking Wednesday off, I decided to donate more today. Apparently, I've forgotten how to trade and lost the ability to make to money or something like that. 

It really sucks. This is me right now.


Okay, now I have to attend a non-profit event for the next couple hours, smile, turn on the charm, and pretend I'm a professional in the field of finance who keeps his calm and knows what he's doing. Will finish the post when I'm back.

CONTINUATION OF BLOG POST


I don't know what to think. Trading is not cutting for me at the moment... wasn't "one that got away from me" but millions of small mistakes magnified by trading size.

If I have one key trait, it's that I can cut loose quickly. Not a trait honed out of any greater discipline, but mostly born out of my neurotic personality that dislikes pain. But the past few days, I couldn't give up trading my worst tickers and I couldn't give up trading size in an effort to make back the prior loss. Heck, I still haven't learned my lesson. I'm overnighting a position on a losing ticker with a lot more size than I usually take.

I haven't reached that "this isn't worth it and I'm not ready for this" moment yet--that yearning for relief and subsequent unbundling of stress. That moment where I decide to scale down, re-dedicate to consistency, avoid tilt, and grind.

In the heat of battle, sometimes I do get away with it. I'd be up 2k, suddenly fuck up and be down 2k in minutes, then "guide it back" to 1-2k. Whew no more of that... That's probably why these impulsive trading moments keep happening.

I ask myself, right now, what I'm trying to do

Profits and Losses
So remember I wrote this post

I started increasing position size since that post even though I went on this long spiel about how much I hate looking at the other traders' pnl and how I sometimes respond to it by ramping up my risk across the board. Every play, every lot executed--more size. This is such an intense topic for me that I'm actually jealous of those "dreamer" types who feel inspired by looking at the profits of others. It's given me so many negative experiences.... yet I did it again.

Well, here we are, more than a month later... and I'm trading worse than ever. Maybe it's related, maybe it's not.

The Edge
Sometimes I feel like I'm on the edge after losing. I still believe I'm a profitable trader but at *that moment*, I don't feel can't trust myself to access that part of myself... which will lead to a lot of broken promises and broken trading plans. So I contemplate taking a break.

Take a hiatus. 
Stop for the rest of the week/month/year. 
Why keep doing this thing that causes so much pain and discomfort?

Not that it necessarily helps, because I took a 10 day vacation in Vietnam and donated $8k on Tuesday...

I want to and I don't want to take breaks. There's 2 reasons why I feel so much reluctance.

1) Losing an essential part of my life: I'm not doing my job. I'm not doing what I'm supposed to be good at. I'm not fulfilling my destiny. I might lose my self-respect. What will I do to fill the void? Yeah I could write more, work out more, read more, but do I have the discipline? Or will I just wallow in self-pity, sit on the couch, and watch TV all day like a loser? That has happened all too often.

2) Financial worries: This one is kinda silly. 

At the beginning of the year, I was plush with excess cash--cash I didn't need to maintain sufficient trading capital. So I decided to expand my horizons and find alternative investments--like angel investing and VC. I invested some seed capital in a couple startups. Then an unforseen opportunity come along. I got to invest in AirBnB through employee stock sale at a 15b valuation (now valued at 25b on its latest round). That deserves its own post. I poured so much money into it that I actually needed to ask someone for a loan to cover my taxes so I didn't have a shortfall in trading capital. I haven't been the best trader since that point though. I got bills, next year's taxes, and that loan to cover. So I'm worried I'll only make X amount which would leave me with Y trading capital and I don't know if that's enough for me to take max positions in all 3 of my accounts...

Yeah that's my worry. Silly.

Gratitude
I mean, I guess I need to be grateful that that is what drives me to worry financially. Not kids, not making rent... but making sure I meet this arbitrary (probably conservatively high) threshold of cash for my business at a future date.

I have all these silly anxieties that get in the way of appreciating the fortunate life I've been given. I know it too and I don't know how to fix this defunct part of my brain. This is why spend so much money on a therapist.

He tells me the antidote to all the jealousy and anxiety is gratitude. I made a list of the most important things to be grateful for, like friends and family. I also try to find a small thing to be grateful for each day; it can be as minor as nice weather in a winter month. It kinda helps...

German words
For...

The compulsive act of calculating how much deeper you're in the hole if you take the next stop out
That desire to not take any profit until you reach a break even (or some other key PnL point in your head)
That feeling of getting back into a trade at a much worse price and not knowing whether it's a good instinct call or overtrading...
That feeling of withdrawing money from an account to to pay for life but not having made anything recently to cover the debit.

I can't take much more of this. I'm too tired to even edit my all-over-the-place writing, I'll do it tomorrow...