Thursday, September 6, 2018

Different Type of Edge

I have a bit of an edge to me--an angry edge. Had it ever since I was a little boy.

If I were writing a screenplay lionizing my entire life, I would cast it in a positive light. It's the chip on my shoulder. It's the drive to be great. It's the fire within. 

There was that time in 6th grade playing pickup basketball during lunch. Sean McFarland was throwing elbows while posting up and giving me not-so-subtle two handed shoves to grab the rebound. He only did this to me, I swear. Mr. Little League All-Star Athlete with all his trophies playing dirty like he's Bill Laimbeer. That piece of shit. He's been picking on me for years now--not just physically on the court, but taking jabs at me. Asking me why I didn't participate in PE--maybe I was just faking it. Asking me if I need to wear that brace for my medical condition. Just these little things he'd say because he thought I was a weakling. I had enough.

I charged at him and forearm-shoved him to the ground. Asked him what's up.

What's your problem dude?!

I still remember his face. He was shocked. He reacted like a whiny little bitch.

Nothing! Fuck you!

Returned a little bitch shove that knocked me back a half step. Nothing else. Pfffft. That's all you got?

When lunch ended we shook hands and that was that-we never had a beef again.

I stood up to a bully. Knocked him on his ass, demanded respect, and was given respect. 

That's a good story. That's a narrative that can sell.

But I'm not writing that screenplay. I'm not that cool. This is a blog where my most popular post was about me losing 6 figures in a trade in the dumbest way possible. It's about me being an idiot.

There's an ugly side to this edge.

There's the time I rage-reset the Super Nintendo and said some not-so-nice things to my sister because she was obliterating me in Mario Kart over and over. I was 7 years old.

There's the time I threw the remote at my cousin because the Blazers were beating the Lakers and he was rooting for the Blazers (traitor!) and smiling at every basket made. Rasheed Wallace would have been proud.

There's the time a classmate from high school hit a runner-runner straight to bust me in a home poker game and I threw such a nasty tantrum that they didn't want to invite me over anymore.

There's the dent in a waste basket that I kicked over and over again at the prop trading desk.

There's the hole in the wall at my old apartment in FiDi.

Spoiled, entitled brat all pouty because he doesn't get what he wants. That's the picture being painted there.

I really hate losing.

I hate it.

It just wrecks me on the inside.

No one is supposed to like it but I wish it didn't wreck me to the core like it so often does--to the point where I stay up all night until I exhaust myself because I don't want to go to bed and I don't want to go to bed because I don't want to think about the next day and what the next day is going to do to me (hint: it's gonna wreck me because I'm a loser and I'm going to lose).

Among my many flaws, my shakiness with handling loss is maybe the worst. Oh I'll take a loss. I'll be disciplined. But then I'll pout. You watch.

The Next Day

Why am I even writing all this? The same reason so many traders blog about stupid personal shit--because they took a big loss. Except in my case it's more like a large "giveback"--a larger than normal profit turned into fairy dust. I am literally the day's top tick to cover. And then the stock trades back to the lows. It certainly feels like a loss to me.

Now here's where stupid twitter traders with their motivation memes say "oh gee golly I messed up but  tomorrow is a new day hooray I love my job #trading $AAPL $TWTR $DRYS".

Fuck that shit, I am going to take this very personally.

The market gets to live rent free in my mind.

I'm the little bitch who moved his stop to break even and got ticked out.

I'm the idiot who didn't take any profits on a big move

I'm the little bitch who swung for the fences but didn't have the heart to stay with the conviction and sit through the swings

I'm the idiot who said he wouldn't trade these nasty "hero setups" anymore but didn't have the character to stay true to his word

NINE YEARS YOU'VE BEEN DOING THIS AND THAT'S THE BEST YOU CAN DO? ARE YOU KIDDING ME? YOU'RE A JOKE. YOU'RE A WORTHLESS FRAUD.

stick figure obama GIF

Ugh.

There are 6am next days, 8am next days, and 9:29 next days.

6am.  I can't have ENOUGH of this market! I LOVE IT!!!
8am. Clock in, check the news, do your thing. All professional.
9:29am. I hate trading.

Tomorrow is gonna be a 9:29 day.

I hate losing.

I hate the next day.

Friday, August 31, 2018

Button Pushing Fast Trader

So I posted a poll on twitter a couple days ago to see how many traders use hotkeys vs. mouse or touchscreen. I was curious because I don't see a lot of discussion on the mechanical side of trading.

I'm a bit surprised that--given that my audience is mostly "active traders"--only 21% use hotkeys.

That means a whole lot of you are missing out on the experience of being a speed demon on the keys.

As well as being a button pusher and the residual effects of being a button pusher.

On Monday, I was excited to see one of my swing positions gap up pre-market. I owned the call options. It was a carefully thought out, methodically entered technical trade from the prior week. I had been patient. I waited for my targets to sell rather than just blindly taking profits into strength. I kept a decent chunk to let it run. The trade was paying me off a fat multiple of my initial risk.

My buddy Clockwork took the same trade and I thought he sold way too much on the initial breakout from the trading range. But that's his choice. So going into this pre-market gap up, he was probably a bit too light on his position.

But then in less than a minute, his PnL catches up to mine on the symbol.



Wow, huge buy imbalance, indicated a point higher.
I bought 30k at 11.60 and sold into 12.
I just made $9000 off that move.

Oh okay. Nice job.
You sneaky fuck.
You goddamn bank robber.

I don't think a mouse clicker could have done what he did.  And certainly not a mobile trader. In theory, if they were absolutely prepared to react to that specific scenario in advance, maybe they could have. But being "absolutely prepared" in this scenario would entail actually having set up hotkeys to be faster, in the first place.  I get the sense that most mouse clickers just don't care about being fast. They don't care about scalping. They are content to look at a chart, make one entry, set a stop, and maybe enter a couple profit taking limit orders and making a living off that. That's fine. I guess this blog post is give perspective to those who don't trade like this.

Clockwork is a natural scalper but he doesn't even make most of his money scalping anymore. The ability just gives him the opportunity to snatch the free money off these special situations.

The best traders at my firm--and I'm only talking about guys who I personally know and saw trade nearly every single day--are really fast. They process data fast. And while they all started off as scalpers, they can do everything now. Long/short. Options. Market plays. Micro cap low floats. Crypto. Gray-box trades. News trading. Scalping. Day trades. Swing trades. Long-term positions. They might trade up to 20 positions a day. One guy runs a hedge fund now. They can trade the patient money and the hot money.

Can you do that with just point and click?

I can't think of anyone who stepped in from the other end of the spectrum--trying to be a relaxed big picture position trader and only using their mouse to make trades--being able to add scalps and hot money trades to their arsenal. Not saying they have to do it--hey, look at Warren Buffett right? he doesn't need to do any of this shit to make his money. Just saying I haven't seen it. Fast can go slow, but maybe not the other way around.

That being said, there is a residual effect to being trained as a "fast trader". You might just get these annoying bad habits that are difficult to shed later. I can tell you first hand.

Psychological drawbacks
  1. Unwillingness to take pain. Thinking you can time every move to a tee, so you don't give positions any room to breathe
  2. "Get out and get back in when it looks better" <--- can get carried away with this concept since getting and out with buttons just feels easy and natural. 
  3. Too much button clicking without purpose, start asking yourself "what am I doing" as fees rack up, feel demoralized
  4. Thinking speed can be the edge on a low margin trade. Oh I don't know what this stock will do but I'll just pay the offer as this seller is cleared, see what happens. Risk a tick maybe I get lucky.
  5. Lose sight of the big picture, trying to trade in and out of everything may just butcher the bigger picture outcome that got you interested in the first place
Advantages
  1. Take advantage of special situations to size up quickly with low risk
  2. Better at scalping
  3. More efficient at filling orders (more important when trading size or on a thinner stock with wider spread)
  4. Better feel for how liquidity moves in a stock
  5. Can manage more positions
  6. Certain strategies are enhanced -- news trading, imbalance trading
So there you go. You want to be a fast, stare-til-your-eyes-bleed mother fucker trading with 17 monitors and a $200 custom keyboard, go for it. There are pros and there are cons. Personally, I just accept that this is part of my DNA at this point and I can only to try mitigate certain things. You can also just be your regular low stress position trader but use hotkeys and maybe save yourself the spread/slippage. It adds up over a long career. Either way, happy trading.

Friday, March 30, 2018

5 Interesting Trades I Made in College: Buying Gold Bullion

There are five trades I want to reflect on from my college days. Each trade represents a new trading phase. And I went through many phases, much like a student who kept switching majors. I want to do political science. No, maybe programming. Hmm, but what is all this hype I hear about eastern european gender studies? Nah, I'll do film and broadcast--I do love movies after all! But then I eventually settle on business economics because it's bland and it'll get me a job.

You don't know if you'll like it until you actually do it. 

Here are the five trades.

  1. Buying gold bullion in 2008
  2. Buying AAPL when Steve Jobs announces medical leave (don't ask me where I sold it)
  3. Buying a small biotech with a drug that... cured laughter??
  4. Shorting AIG after it went from $6 to $40
  5. Shorting some scam micro-cap called InfoLogix
 I don't know if I will finish this but I finished the first part and would rather publish it now before I decide I don't feel like blogging again. So without further ado...

Buying Gold Bullion in 2008


This is the time I went full gold bug. 

It was the year 2008. What a wonderful time it was to start learning about the markets. Big banks going chapter 11. The market plunging to 10 year lows. My trading career was born in the chaos. Molded by it. You saw Too Big to Fail, you know what I'm talking about.

We all had our narratives to explain why this huge, spectacular, horrible thing was happening to the market and the underlying economy. I had mine.

2008 Peter To was a hardcore libertarian. Non-stop. This was his soap box at the time.
  1. Vote Ron Paul otherwise you're just voting for the evil government-loving Republicrats
  2. No bailouts or nationalization! I say let them fail and see what happens. MORAL HAZARD!
  3. End the Federal Reserve! Bunch of no-good money printers stealing my wealth.
  4. Mainstream economics was 99% politically-driven fallacy and masturbation in linear regressions. I called my Econ 100 professor a neoliberal shill on the margins of my midterm since I knew he graded them himself. I also told a policy class TA to fornicate with himself because of he told the class how great the New Deal was. 
  5. Everything happening the economy is happening because people are stupid and governments are incompetent and/or corrupt. We printed too much money, we got greedy, and Greenspan created this gigantic housing bubble. Now we're grade-A FUCKED. That was my narrative.
  6. Hyper inflation was imminent! We were on the precipice of an extraordinary collapse of confidence in the U.S. dollar once the Fed tries to print their way out of this mess.  Peter Schiff said so and I bought his book!
2008 Peter obviously knows everything about the world and how it works. And hyperinflation is so obviously going to happen, he thinks. It's like a mathematical certainty based on the Austrian school of economics, which is always right because capitalism is the purest system and government intervention always ends badly. 2008 Peter, to his credit, also puts his money where his mouth is. There must be a way to profit off of this inevitability. So what does he do?


Oh, like a gold ETF or gold futures where he can trade it and avoid high transaction fees? No.

Fuck that shit. He buys actual gold coins.

coins GIF

Because once the economy collapses, those fraudulent paper vehicles will never deliver! Fake gold! You need the real thing that you can touch damnit! 

That's what doomgold666 on thesilverforum.com said and he has 15,000 posts in the 9 months so he seems pretty credible.

2008 Peter was ready for $10,000/oz. Gold. He was ready for anarchy in the United States. He was ready to claim his status as an oracle and a market prodigy. He was ready to give all these idiots around him a big fat, resounding "I told you so!" 

2008 Peter was also an impressionable kid. Maybe moreso than he'd like to admit. And when your conviction is only based on the sooth sayings of other self-anointed experts rather than actual experience and observation, is it truly real conviction?

2008 Peter was also a market rookie with zero experience. Would he really stayed composed if the market started to test his ideas? Would he really die on his own sword for his predictions?

Let's see how this trade turned out, in four panels.

ENTRY.


TRADE MANAGEMENT.



EXIT.



POST-HOC ANALYSIS.



Ouch.

I loved those gold coins. They were like family to me. My little shiny metal children.

In those few months of drawdown, I learned that you never go full gold bug. And never make market predictions based on passionate political opinions. Only idiots do that.

It pained me to sell them but I had to let go. In those 5 months since buying, I had unsubscribed from the gold bug libertarian cult. 2009 Peter had learned the folly of his ways. He needed liquidity so he could move onto the next phase and make godlike returns from his new strategy.

2009 Peter was going to a new Peter, a better one. He was going to be...

a Value Investor...