tag:blogger.com,1999:blog-83678595019855157862024-03-18T02:03:18.708-04:00Churning and BurningPetehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.comBlogger35125tag:blogger.com,1999:blog-8367859501985515786.post-87648882549990817232023-08-24T11:28:00.000-04:002023-08-24T11:28:00.447-04:00NEW SITE: CHURNINGANDBURNING.COM<p> For those of you on mobile and not being automatically re-directed to the site:</p><p>https://churningandburning.com/</p>Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com0tag:blogger.com,1999:blog-8367859501985515786.post-3454829027418778842021-03-24T22:18:00.001-04:002021-03-24T22:18:40.633-04:00GrievancesThere was this trader named <b>Tony</b> at my old firm, back in 2011. He was an accomplished veteran trader and considered one of the core members at the firm. He was also extremely competitive and had no filter--he would say what was on his mind and not hold back, particularly if he was already on edge from the stress of trading. He cursed like a sailor and broke keyboards with the dramatic flair of Gallagher smashing watermelons. I could relate to that. I loved Tony.<div><br /></div><div>Tony also held a lot of grievances. He didn't like certain people.</div><div><br /></div><div>In this industry, I think there are some grievances that are valid. Finance is an infinite suck hole of frauds, con artists, charlatans, trolls, schemers and arrogant bullies--real unsavory assholes that actually warrant your complete abhorrence.</div><div><br /></div><div>Then there are some grievances that maybe aren't as warranted. Some guy just rubs you the wrong way and you don't know why. Tony's grievances, at least from my outside perspective, seemed to fall in the latter category.</div><div><br /></div><div>There was another well-known trader in the same building in a different firm--let's call him <b>Boris</b>. Boris would occasionally appear on CNBC for technical analysis segments and his take on the general market direction. He drew pivot lines and used 5 different moving averages. He would smile and tell you to trust the trend. Family man, had a dog. Did a lot of fitness competitions. Native New Yorker who would tweet about how much the Jets sucked. Milquetoast centrist political views--didn't like Trump's antics but didn't like the democrats brand of tax and spend. A totally non-controversial dude. Basic-Ass Boris, the every man's trader. Who wouldn't like Boris? </div><div><br /></div><div>Tony. He <i>really</i> did not like Boris. Here are some things I remember Tony saying, while shit-talking Boris.</div><div><br /></div><div><i>Boris is such a fucking piker. Last month he pounded the table 'long gold, I'm loaded up, full size!' I went to the risk monitor to find how much he had and it was 200 shares of GLD. That's full size?! Fucking pathetic bro.</i></div><div><i><br /></i></div><div><i>'Trim and trail' blah blah blah. Ride the trend 'fuck off'. All Boris does is spout his dumbass clichés, get a life bro.</i></div><div><i><br /></i></div><div><i>Boris gave himself his own nickname--the Bulldog. Who does that bro!?</i></div><div><i><br /></i></div><div>Boris was (and still is) a legitimate trader. Tony, in one of his refreshing moments of clarity after the rage dissipates, conceded to me that Boris knew what he was doing. <i>I give him a lot of shit because he's so corny but he's got a good system</i>. To this day I wonder what he did to get on Tony's bad side.</div><div><br /></div><div><b>My Grievances</b></div><div><br /></div><div>I think I'm starting to be more like Tony, and not in a good way because I'm not as funny as he was. I have my own grievances. </div><div><br /></div><div>There was this stock a couple weeks ago. It doesn't matter what ticker it was, there's several of these trades every week. They're all the same. It's one of my main bread and butter setup trades. I took the trade and it worked very well. Every confirmation signal occurred, it trended smoothly for hours and closed at the range minimum, exactly where it should. Since I was so deeply in the money, I felt so comfortable in the trade and thus decided to hold a larger than normal position overnight and not even monitor the afterhours action. Lately I felt I had left a lot of money on the table by reducing risk at the close "just to do it", because 9/10 times the gap continues in the direction of the prior trend on these particular setups. I went to the gym. Another reason why I felt so comfortable is because I have executed and observed this trade setup many, many times--I had a deep understanding of how it plays out.</div><div><br /></div><div>Then I come back to my computer an hour later. The stock had moved against its closing price by 25%. Very unusual, makes no sense. I reacted to my own disbelief by choosing to re-attack the stock and add back all the risk I had taken off (about half) at those levels. This was a mistake ("I don't like this move so I'm going to fade it." DON'T DO IT GUYS<b>)</b>... it went against me in a straight line to a cumulative 50% move. All my profits were gone. What the fuck?</div><div><br /></div><div>I had to check for news--see if maybe an unexpected headline or filing had caused this extremely unusual afterhours move. I saw nothing on my news feeds. Then I tried twitter. Low and behold, the first result of my search of the ticker's cash tag, was from a widely followed day trader--let's call him <b>FuckFaceTrader</b>--who runs a large chatroom. I was very familiar with his trading style, his dialect, his voice, and his background. I think he's a good trader. I don't think he's a bad person. His chatroom is fine. That's all I will say about that.</div><div><br /></div><div>I'm not going to copy and paste the exact thing but the tweet was along these lines:</div><div><b><br /></b></div><div><b>"Man the guys who are doing so and so on $ABC are such pros! I can't believe anyone still holds these plays overnight! LOL"</b></div><div><br /></div><div>Oh. That explains everything.</div><div><br /></div><div>I flipped my mouse over. I sat back in my seat and chuckled. <i>Yep, of course. *The pro's* got me. </i>Then I yelled at my screen.</div><div><br /></div><div><span style="font-size: x-large;">FUCK YOU!</span></div><div><span style="font-size: x-large;"><br /></span></div><div>Just reading that tweet was as tilting as losing the money itself. </div><div><br /></div><div>With nothing making sense and the stock continuing to hold up until the end of afterhours trading at 8pm, I decided to exit my position. Because of the mistake of re-entering at a relatively poor price, I ended up with 5% of my original paper profit marked at the closing price. A pittance. 9/10 times nothing happens afterhours but this had to happen on the day where I leave my screen and carried a larger position. I was not happy about this.</div><div><br /></div><div>FuckFaceTrader's tweet lived rent-free in my head for the rest of the evening.</div><div><br /></div><div><i>Did he know something?</i></div><div><i>Did he cause that move by pumping it in his social network?</i></div><div><i>Is he actually trading this thing or is it just another meaningless commentate after-the-fact bullshit tweet?</i></div><div><i>It's gotta be just another hindsight bullshit tweet.</i></div><div><i>Why tweet that shit though? You make it sound like you're so fucking smart as if it's some big fucking scheme that you are privy to. </i></div><div><i>WHAT IS IT MR. NASDAQ DETECTIVE, WHAT IS THIS SECRET YOU KNOW!?</i></div><div><i>No, fuck that, he doesn't know shit. </i><i>It's just bad luck that can't really be explained. My data backs this up.</i></div><div><i>I want to stab his face right now.</i></div><div><br /></div><div>I started shit talking this guy to anyone who would listen. </div><div><br /></div><div><i>Did you see what this fuckface tweeted? </i><i>What a fucking asshole, I hate that guy, I can't stand him. I hope he blows up and loses every single dollar in his account. Why does he always pretend he knows more than he really does?</i></div><div><i><br /></i></div><div>I'm sure the people listening to me must think I am insane. Like why am I mad at this innocuous tweet? Why do I care what this fuckface thinks? Why don't I just move on? </div><div><br /></div><div>Why? Because I take it as a personal affront when my hard-earned profits get erased on some random bullshit move afterhours, with no news, and there's some asshole fuckface on twitter suggesting that there's something so transparent and obvious about it (and that I'm an idiot for not seeing it). <b>GET THE FUCK OUT OF HERE MAN! </b></div><div><br /></div><div>Grievances. I have a lot of them. You're a saint if you trade for ten plus years and don't have any.</div><div><br /></div><div><br /></div>Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com4tag:blogger.com,1999:blog-8367859501985515786.post-75290218286536923742021-01-10T15:16:00.003-05:002021-01-10T15:16:33.110-05:00What does resilience feel like?<p>In 2020, I traded every single day of the year. Not a single day off. That's the first time I ever have done that, for any calendar year. </p><p>That's not like me. There's always a part of me that gets a bit flighty and needs to get away from the screen for a prolonged period. Usually when there's any kind of drawdown or adversity. I was fortunate to have a stellar year for my own standards and I avoided prolonged drawdown all year. I had a handful of deeper red days but each time I managed to claw back to the high watermark within a few days. This is vital, because what a stoic fund manager might consider a normal drawdown (percentage wise) is usually a number that brings my fragile bones into full blown crisis mode.</p><p>Those in my inner circle know my dialogue well when I am in crisis mode.</p><p><i>I'm going to retire from trading. I don't know what I am doing anymore so I might as well leave with my dignity intact.</i></p><p><i>These stocks move differently now, the game has evolved past me. It's all over. They always know when I have size and when to run it the other way. Inexplicable.</i></p><p><i>I just don't even give a shit anymore. Trading is a treadmill and caring about these numbers going up and down is just stupid.</i></p><p><i>I now consider the pursuit of money to be a wholly evil endeavor. I don't believe in capitalism anymore. I'm going to donate all my profits to charity and live as a monk.</i></p><p>You get the point. I'm sure they all roll their eyes at this point--"whatever Pete, you're just going be back doing this tomorrow, you know it, I know it, we all know it."</p><p>The first week of 2021 did not start off great for me. The weekend was weird. I wanted to do a thorough review of my 2020 and set some goals for the new year, review some of my trading, all that standard self-improvement crap. I ended up doing absolutely nothing. I sat on my chair like a dumpy lump of coal, watching college football games I couldn't give two shits about, falling asleep like an old man. I didn't cook, I didn't do chores, I didn't exercise, didn't want to do <i>anything</i>. I just felt no enthusiasm for the new year. </p><p>Monday came around. I had the familiar morning dreads... <i>I don't want to trade today, I should just go do something else today.</i> I made a note of it in my journal in the pre-market. I was practically sleep walking, opting to look at NBA box scores rather than go through my morning preparation process. Sometimes this actually helps me set the tone for the day... I don't feel like trading so why even hype myself up--at least then I'll trade small size, reduce my holding period, and maybe "let the market come to me". Well..</p><p>...that doesn't happen. I punt off $60,000 in ten minutes. I shut off my screen in disgrace and go back to bed. I can't sleep so I just lie there and my brain slowly descends into crisis mode again.</p><p><i>I'm not going to repeat what I made in 2020. It's too much of a burden. Time to accept that reality.</i></p><p><i>I can't even look at stocks right now, it's too painful to see quotes.</i></p><p><i>Who does that? Seriously, who does that on the first day of the year like that? What a moron. </i></p><p><i>Go ahead and take a long break. The whole world is going to make money off TSLA and bitcoin and all these 10-bagger micro caps, you're going to be left behind. You'll feel worse.</i></p><p><i>I can't even trade smaller because it's just going to make me feel like a huge asshole for being sized into the loser and having almost no skin if I win. SO STUPID. WHY BOTHER!?</i></p><p><i>Money doesn't even matter. Nothing matters. Eat Arby's.</i></p><p>Yeah I don't recommend large losses. They suck ass.</p><p><b>What does resilience feel like?</b></p><p>You ever get on your twitter feed and see some 21 year old hot shot trader (usually being liked or RT'd by someone else, hell no am I ever following shit like that) tweet something like... <b>"A set back is just a setup for a comeback!"</b>?<b> </b>Does anyone else just want to punch their screen whenever they read shit like that? Is it just me?</p><p>I'm not wired like that. I don't puff out my chest and fake it until I make it. I don't flex to the whole world that I am mentally tough by spewing platitude porn about overcoming adversity. <b>In fact, I'll freely admit this to you right now--I'm fragile. I'm a snowflake. I fold faster than a lawnchair. </b>Dread, crisis, doom--whatever you want to call it--it sticks with me until I somehow find the wits to scramble my way out of it. This idea that you're not supposed to trade emotionally compromised is a fine idea but for me, it can't work because I have these weird mental patterns that I cannot escape. I can't just take a year long sabbatical until I "feel good" again. I need to write the same story over and over again. I am Sisyphus and I am literally rolling the boulder back down so I can push it up again. </p><p>I take the day off on Tuesday. <b>My first day off in over a year.</b> I still feel like total garbage. I still have to self-flagellate myself for what had happened on Monday. "Every day is a new day" <b>-- YEAH RIGHT, if fucking only it was.</b> Again, I struggle to fall asleep. I have insomnia all week long.</p><p>I come back to my screen Wednesday. Same morning dread. Still in crisis mode. Still feeling that wincing pain when looking at stock quotes. Should I just not trade?</p><p>I came to a realization--No. I have to trade, don't I? I just have to trade away out of this. For the millionth fucking time, I have to do this again.</p><p>How do I cope with this? Well, I get this one recurring thought: I often run through this dark and sad "proposition" of sorts that maybe if I get crushed again, it's actually a good thing--like a boxer who's finally taken one too many punches. I'll finally quit forever and this miserable joke I call a trading career can finally end. I'll go do something actually productive and interesting instead. And if I don't? Well I get to keep going another day and maybe I made money and money is always fine, I guess. Win-win.</p><p>It's 9:30. I start trading. Every feeling in my bones is screaming <b>THIS SUCKS, I HATE IT.</b> Somehow I make some money. I feel numb. I know I'm not out of the woods yet and I have to do this again the next day. I spend all evening doom-scrolling my twitter feed and watching True Detective season 1 clips on Youtube. <i>Time is a flat circle</i>. Maybe I should write something down about what I'm going through, no, nevermind--I don't want to think about myself, it's too scary. Lakers are on at 10, good excuse to stay up late and feel like shit tomorrow.</p><p>Thursday. I make a bit more. I'm close to the high watermark again. Now I feel pissed because my brain is running through the mental math of where my PnL could be if I didn't allow that calamitous Monday to happen. Here I am settling for break-even while the whole world continues to crush these easy markets. Chippy/intense/combative/competitive-me is back though. Anger is a step above depression, so I consider this a win.</p><p>Friday happens. I am so afraid of losing or taking intraday drawdown. I'm at the brink of another meltdown and I just can't, man. I trade in a very dodgy manner where I am practically pushing buttons in response to my own discomfort rather than any actual price or idea analysis. Somehow this works. I get back to break even and then later, slightly green on the week. I don't even know how I did it. I can't process anything. Deep inward reflection--no, not now please. I can't wait for the weekend so I can turn off my brain and not review any of my mistakes so this can happen a few weeks or a month from now and I'll do this all over again.</p><p>Now it's the weekend. I am starting to feel normal again. Let me predict my own future here.... some future week from now, maybe next week, I am going to make $100,000 or more. <i><b>I'm back baby! Never a doubt!</b></i></p>Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com12tag:blogger.com,1999:blog-8367859501985515786.post-16198556011567617522020-12-24T22:10:00.000-05:002020-12-24T22:10:40.326-05:00The Yips<p>I started watching sports around 1996. Magic Johnson came out of retirement. Michael Jordan won his first title since his own un-retirement. Brett Favre won the Super Bowl. The Yankees won their first World Series in eighteen years. Oh those damn Yankees.</p><p>The Yankees formed a dynasty and won 3 more titles... and I hated them more than any other team*. I fully bought into the Evil Empire narrative. My impression was they just bought all their players because they had the most money. My earliest memory of an elite second baseman was Chuck Knoblauch of the Twins. He could do everything--hit, slug, run, field, and throw. Then the Yankees got him too?! Unbelievable. Who could ever beat them?</p><p><span style="font-size: xx-small;">*10 year old me would never believe adult me would actually move to live in New York. New Yorkers are loud, obnoxious, arrogant buttheads.</span></p><p>Then strangely, Chuck Knoblauch stop doing everything well. He couldn't throw anymore. He once <a href="https://www.youtube.com/watch?v=dnJFklbt0es&ab_channel=ExposClassics">airmailed a routine throw and it ended up hitting Keith Olbermann's mother on the head</a>. Those rude, obnoxious Yankees fans with their non-stop booing probably ruined his psyche forever, so I gathered.</p><p><span style="font-family: inherit;">My understanding of sports evolved as I grew up of course. I later learned that Knoblauch had developed the case of <b>The Yips</b>--something wikipedia defines as "the <span style="background-color: white; color: #202122;">sudden and unexplained loss of skills in experienced athletes." I saw <a href="https://www.youtube.com/watch?v=KDZX525CSvw&ab_channel=MLB">Rick Ankiel </a>get the yips. I saw <a href="https://www.youtube.com/watch?v=E9z7kfdBUOo&ab_channel=MWVHighlights">Markelle Fultz</a> get it. It fascinated me that these professional athletes could just wake up one day and just... completely lose it. What they worked for and developed their entire lives--gone in a flash. How does that happen?</span></span></p><p><span style="background-color: white; color: #202122;"><span style="font-family: inherit;">I live with an irrational fear that one day I will get the yips at something very important to me. I'll hit absolute bottom and no matter what I do, it'll just never get better because something is deeply, deeply broken.</span></span></p><p><span face="sans-serif" style="color: #202122;"><span style="background-color: white; font-size: 14px;"><b>MY OWN YIPS</b></span></span></p><p>My primary hobby is shooting pool. A bit of eight-ball, a bit of nine-ball, sometimes even straight pool--you name it, we'll play. I began playing in college and I would practice, practice, practice my ass off to get better. Stop shots, draw shots, and follow shot drills all night long at the rec center, midterm season be damned.</p><p>I constantly obsessed over my pool stroke. I practiced using the old coke bottle technique in my spare time away from the table--the goal was to shoot through the small opening without touching any part of the bottle. I developed my stroke to hit power draw, force follow, and clean horizontal English. Pocket billiards is a beautiful game when you can spin the white ball.</p><p>Fast forward to my years in New York. I'm practicing my draw shot on a communal lounge table. I aim low, take a few warm-up strokes, and let her rip.</p><p>The cue ball just stops. No roll back. I stunned it.</p><p><i>Okay, that was a one-off, I let the cue fly up on impact.</i></p><p>I set up the shot and try again. I tell myself to make sure to follow through.</p><p>The cue ball meekly draws back maybe an arm's length and fails to hit the rail.</p><p><i>That was pathetic. </i></p><p>I chalk up the cue a bit extra, set up the shot and try again. I make sure to put some force into it.</p><p>CRASH! The cue-ball goes flying off the table and skitters away, hitting a table leg several feet away. I saunter over to pick up the cue-ball and sheepishly apologize to the young lady studying at the table. <i>Sorry, that was just my pride dribbling onto the floor beneath you.</i> </p><p>What happened is that I hit too low and dug under the cue-ball--classic rookie mistake when trying to muscle your way into a draw shot. I get back to the table and I just take a pause to just evaluate where I am. All of a sudden, I can't do this thing that I was once able to do without even thinking about it.</p><p>I have to get myself out of this. I can't play well if I can't trust my draw. I imagine myself in a league match botching a draw shot and it brings shivers down my spine. I keep practicing. I adjust and fiddle with just about everything I can think of--elbow hinge, foot positioning, how I bend my waist, shoulder levels, grip, anything. Nothing works. It doesn't make any sense. Every shot feels like so much effort for so little input as the ball barely goes backwards. I don't dare hit power draw out of fear of embarrassing myself again. Every failure sends me into a state of internal screaming. </p><p>Eventually, rage simmers into sadness. My game has lost its beauty. For the moment I am no longer an artist of the game, but just a caveman hitting a ball with a stick. This sucks man. I pack up and go back to my apartment.</p><p>(Eventually I figured out I was doing something to lock up my wrist. My draw shot is fine now but when it gets spotty, I worry...)</p><p>There are rare times where I am in a prolonged draw down and I worry it's over. I've completely lost my nerve and there's nothing left to do but retire in shame. There are times when I can't apply certain parts of my total trading playbook. About a year in a half ago, I worried I was too slow at trading. I couldn't scalp anymore. I couldn't make fast lower timeframe entries anymore. Since then, I've not only completely conquered those issues, but have since achieved record level profits on trades that I would label as <a href="http://ptotrading.blogspot.com/2018/08/button-pushing-fast-trader.html">"fast trades"</a>. A few weeks ago I worried I couldn't buy stocks anymore. I had been shorting too many stocks and had developed this tunnel vision where I can no longer buy stocks. I might as well add "short seller!" to my twitter profile and become one of those annoying types that over-identify with their mode of trading. Then I made some great breakout trades that worked out just fine. It's a constant state of worry.</p><p>Success can be temporal and delicate. Some people wake up believing they can do anything they put their mind to. I wake up in cold sweat thinking there are so many ways to fail unexpectedly. I hope that if that day comes, I have already made enough to screw off.</p><p><br /></p>Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com2tag:blogger.com,1999:blog-8367859501985515786.post-91410788922356070242020-12-19T19:01:00.002-05:002020-12-19T19:57:20.378-05:00Writing More // Social Aspect of Trading<p>I have been doing some reflection on why I don't write more. I think about what this blog could have become if I committed to writing daily or weekly to it and I honestly think it would have been one of the most greatest trading blogs (maybe ever?!). Instead, as it exists--it's the one good story (<a href="http://ptotrading.blogspot.com/2014/11/the-day-i-lost-sht-ton-of-money-part-i.html">the FNMA loss story</a>), a bunch of interesting niche subjects, and a few blurbs that paint me as a massive emotional monkey (which I won't deny).</p><span><div><span>The FNMA story was a huge hit for me. It's still by far my most widely read blog post. It got published in a magazine. Since then... blogging has been spotty. Now that story is 5 years old and there is much more awareness about day trading in the online cultural zeitgeist. Trading memes (stonks!) have exploded in the last 2 years. Millionaire sports bloggers will live stream 7 figure gains and losses and nobody will bat an eye. Every few months or so there's a new story on Bloomberg about this guy from WallstreetBets exploiting another glitch on Robin Hood. The same post on FNMA had it been published now would not get the same traction as it did before. I probably blew it. I will likely never achieve my potential as a blogger/writer--it's gone just like that.</span></div><div><span><br /></span></div><div><span>Reasons why I don't write more:</span></div><div><span><br /></span></div><ol><li><span>I'm a perfectionist. I had a vision for this blog early on that it would include great illustrations and graphs, concise explanations of complex trading topics (beyond your typical market psychology pseudo-babble and platitude porn), and stories with real heartfelt emotion that could connect to every trader. I held myself to high standards--that I had to repeat the same great FNMA post over and over and over again. I would save a draft, edit it for a few hours, and at the last minute before publishing it, reject it entirely. Later I would just reject entire ideas out of hand without even writing a single word. I would just assume nobody cared what I had to say anymore, or that they would laugh at its lack of relevance or importance. Self-sabotage is a bitch.</span></li><li><span>I worry about what other people think about me. There have been many moments where I wanted to just spill something out for the sake of spilling it out--a tough loss, a tough missed trade, someone I'm mad at, anything. And I'd write and write and write and then after the emotional lows kind of wear off... <i>uh what the hell am I thinking? if I publish this, everyone is going to know what a total headcase I am. Your image as a professional trader will be utterly destroyed and you'll never regain anyone's respect ever again. Ah shit, delete it all.</i></span></li><li><span>I'm a private person. I have second thoughts about revealing too much. But I also believe that sharing in vivid detail, even to the point of over sharing, is critical to writing in a way that connects to others. Many traders have reached out to me say "dude, I totally felt the same way in my trading experiences as well." Some I have met in real life to a share a beer with. How much to share, how much to reveal, it's a tougher balance now then when I was just an idiot 20-something who lived in a fake wall bedroom with 2 roommates.</span></li><li><span>My love and hate relationship with trading. Sometimes, I just absolutely hate trading... and I have learned that, in reality, it's just an extension of the self-loathing I feel about myself. Losses. Drawdowns. Undisciplined trades. Missing out large moves. All common events that happen to every trader... and I have found a way to personalize each and every time that it has happened. That it is a signal of how I'm not good enough. That everyone else is better. And that these are hard, uncomfortable, undeniable facts. And that the best way to cope with these facts is to completely withdraw all thoughts and reflections about trading and markets--go do something else, anything else, watch Netflix, watch football, take long naps, eat lots of junk food. Just be a lazy piece of shit with no ambition. 9:30am on Monday is absolute dread and 4:00pm on a Friday is the great escape. <b>I have lost count of how many times I have fallen into this mental rut.</b> Needless to say, it makes writing about trading much more difficult.</span></li></ol><div><span><br /></span></div><div><span>Anyway, that's why I don't write as much as I should. The next paragraph should be this *thing*--perhaps a renewed pledge to write more--some grand *thing* to tell all my readers that I have turned a new leaf and it's a new me, but that would just be a lie. I'll take it a day at a time and we'll see where it goes.</span></div><div><span><br /></span></div><div><span><b>The social aspect of trading</b></span></div><div><span>I wanted to write about the social aspect of trading. This might be something I have to break down into multiple posts until I figure out the grander theme of what I want to express. By the way, this is another reason why I have struggled to write--the constant nagging voice telling me to tie every story I write about into this bigger picture message. I blame my 10th grade English teacher Ms. Kim for making me do all those laborious essay re-writes. Sometimes I don't have that bigger message yet, I just need to stream of conscious and put it out there. Let's just move on.</span></div><div><span><br /></span></div><div><span>I'm a lone wolf at heart. I had quite a bit of social anxiety in my childhood. I often think about my experiences in eighth grade when I had no friends to hang out with at lunch time. I had to find ways to kill time without being seen as being totally alone and thus vulnerable. My go-to trick was to line up in the snacks and drinks line over and over again. I'd find the longest line, start at the back, then when I was close to the front...<i>oops I just checked my wallet and realized I don't have any money to pay for anything! How silly of me! </i>Then I would go to the bathroom. Then I would go back to the court yard and find the longest line again. It's likely that no one ever paid attention to me at all anyway. Or maybe one keen-eyed student saw my pattern, notified his group of friends, and they made a recurring joke of me in their snobby little circle--and I'll never know. </span>. It's all so silly when I look back on it. I was a mostly normal, unremarkable child but whatever mechanism in my brain that existed to socially connect with others was kind of broken. I felt completely fine on my own and even a little stand-offish whenever I had to deal with groups or cliques where I was the outsider.</div></span><span><div><span><br /></span></div><div><span>Flash forward to mid 2018. I went back to my old prop desk to have a beer with a friend and just shoot the shit about trading and the markets. We would reminiscence on the struggles both of us endured on the way to becoming successful traders. This is the social aspect of trading I enjoy--connecting to someone I know over shared experiences and the common growing pains of this incredibly difficult industry. He then invited over some of the junior traders to form a larger free-for-all group conversation. This is the social aspect of trading I do NOT enjoy.</span></div><div><span><br /></span></div><div>Somewhere along the line, the conversation devolved into trading size. Everyone wanted to talk about size. How they can push each other to be bigger in every single position. <i>Oh you have 10,000 shares? Ok for that reason, I have to buy up to 20,000 because I can't stand the thought of a pussy like you being bigger than me!</i> <i>HaHa holy shit I am so big in this position HaHa! HaHa It's NoT mY mOnEy!!!</i></div><div><span><br /></span></div><div><span>Ugh.</span></div><div><span><br /></span></div><div><span>One trader (an actual good trader most of the time, to be fair to him) ended up explaining to me about he how was down beyond his intraday risk limit and that his "ingenious" trade idea to make it back on the day was to sell a gigantic amount of expiring out-of-the-money TSLA weekly options and collect the premiums. He rationalized to me that he just needed to be green so badly and that he knew he was exploiting a known weakness in the firm's risk management of options positioning (nobody was allowed to have such a large naked short position). He's literally one ill-fated Elon Musk tweet away from blowing up the firm. He said he felt absolutely sick with his risk and that he could barely process his thoughts while sitting there waiting for his options to expire--and that weirdly, he LOVED this feeling!</span></div><div><span><br /></span></div><div><span>I felt disgusted. I found myself experiencing a familiar feeling. This ugly feeling in the pit of my stomach that hearkened back memories of my childhood.</span></div><div><span><br /></span></div><div><span><i>I don't belong here.</i></span></div><div><span><i>I don't fit in here.</i></span></div><div><span><i>I don't *like* anyone here.</i></span></div><div><span><br /></span></div><div><span>My discomfort was palpable. These kids are just only talking about how much size they could push like it's end all, be all purpose of living life. Not to mention the very audacity of it all! Did they even make money consistently? Do they even have an edge, or care? I know full well the low success rate of prop trading. My own training class had 12 traders and only 2 of us experienced any sustained success--and a prop manager would say that's pretty good! These knuckleheads, likely unprofitable to this point, are clearly skipping steps. You need to actually make money before you discuss the practice of "making more". I'd rather bore myself to death around a dozen trading nerd-bots spouting Steve Burns market psychology platitude porn than continue to listen to these hyper-macho posturing shitheads yuk it up any longer.</span></div><div><span><br /></span></div><div><span>But I also had this devil's advocate voice to my initial reaction. Maybe I'm of touch. Maybe I lost it. Maybe I'm the old guy now. Maybe the market has worn me down to a shell of my former self and these are the young, hungry upstarts who are going to make the profits that I lack the will and resolve to take. I don't know. Maybe the "size is everything" mindset hack is what I have always needed but was too scared to embrace. It's a nightmarish thought. </span></div><div><span><br /></span></div><div><span>I congratulated my friend on his recent successes and wished all the young traders good luck while making sure to maintain a warm smile to none the wiser, and then I exited stage left. Once I knew I was alone, I let out a huge sigh of relief. <i>Thank God I got out of there. </i></span></div><div><span><i><br /></i></span></div><div><span>Then on the subway ride home, I had another thought. <i>You better trade more size now because if the day ever comes where these assholes make more money than you, YOU WILL NOT LIKE IT.</i></span></div><div><span><i><br /></i></span></div><div><span>I'm not sure if that makes me a hypocrite or some other bad label. "Something something" about the duality of man.</span></div><div><span><br /></span></div><div><span>Like I said, I am just writing and figuring out the message later. Adios.</span></div></span>Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com1tag:blogger.com,1999:blog-8367859501985515786.post-66534061120467371652020-07-03T12:17:00.000-04:002020-07-03T12:20:30.875-04:00False Inspiration<br />
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I am currently reading the Jim Simons book, "The Man Who Solved the Markets". It's very good, I suggest you check it out.</div>
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There's this throwaway line in there that stuck with me.</div>
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<i>"On Wall Street, traders often are most miserable after terrific years, not terrible ones, as resentments emerge—yes, I made a ton, but someone wholly undeserving got more!"</i></h4>
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Let me give you some context. I had a not-so-great 2019. I was marginally profitable but miserable. I kept thinking about quitting and telling everyone I know about it kinda like how people want to everyone to know they're quitting Facebook. It was more an expression of my exasperation than an actual serious consideration. Trading sucks. It stopped being fulfilling a long time ago. That young kid in his 20s who was the first to show up to work wasn't there any more.</div>
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I had dinner with an old trading mentor in December to talk freely about my future. Eventually the conversation spilled over into me having left prop trading many years ago. I get the sense he thinks I've underachieved. He referenced a few colleagues who were at my experience level, that were making huge numbers, and he said he never knew anyone who left and made more. He said I was just as talented as they were. Maybe he's right but it depressed me further to hear that. In the end, I decided to press on. I had to keep trading and just do better. I had the freedom and financial means to do anything else but there just wasn't this deeply inhibited life long dream to pursue, like starting my own restaurant or writing a screen play. I didn't have other skills. The road led back to markets.</div>
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Skip forward to 2020. I refocused myself and am now having a record personal year and we're only halfway through. But I kept feeling this nagging sense that "everyone else" is doing better. Whether it's just a hot market after covid-induced volatility or whether it's all the new stay-at-home retail money flooding the market, it just seemed like anyone can make money. I couldn't feel any pride in my work. I'm making the same levels of PnL I made 3-4 years ago on my best trades, it just happens more frequently. Maybe that's a sign of stagnant growth the past several years—and I'm criticizing myself for it like it's this indictment on my overall self-worth and character. Every day is a challenge to put the blinders on and try to trade with minimum levels of toxicity and hyper-negative self talk. Just do the best I can, pay the bills. Not much passion. <i>Whatever.</i></div>
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Last week I had a "social interaction", and I can't elaborate more than that, that all but confirmed my worst insecurities. It shook me to my core. My so-called "best year ever" is nothing. It's chump change. I felt small, resentful, and pathetic.</div>
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I try to be ignorant of others' PnL. Unfortunately this "social interaction" occurred unintentionally. I hate thinking about money and letting it dominate my thoughts. The meta thought here--maybe I should "let myself" be motivated by money. Maybe the best ones are motivated by seeing that big green number get bigger and greener. It's not like I can pretend I am this virtuous being by not caring—it's not as if I am spending my spare time rescuing kittens and donating my money to orphanages. Maybe I just resist because I'm not good enough to play the bigger game—and it's just <i>that painful</i> to think about it.</div>
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That evening, I started writing down all these goals to trade more size and reach these arbitrary PnL goals by years end, 2 years, and 5 years. All the emotions I had tried to bottle up since my soft reboot in January, they spilled over like the Exxon Valdez. I'm going to use this anger as motivation, I told myself. I'm going to make myself uncomfortable. I'm going to dare to dream. I'm going to... blah blah blah, you know what I'm talking about.</div>
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So predictably, I traded like a total asshole for the next two days. I pushed more size and tried to prove a point. <span style="background-color: white; color: #222222; font-family: "arial" , "helvetica" , sans-serif; font-size: x-small; letter-spacing: normal; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"> </span>I snapped a 16 day win streak and tallied one of my worst red days of the year. My only dominant thought was "how can I have x amount of size" on this trade, little else. I had zero feel for the market and let most of my positions hit their max pain point. To my credit, Friday I did better and achieved a green day that would be top-5 for me in 2020. To give myself a fair grade outside of PnL though, it was a mixed bag. The day was a calamity of emotion and errors but the trade I was most heavy on, I was on the correct side (which can cure all ills). </div>
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On that day (the "good" one), I actually broke down into full meltdown. I had caught a good move on the insane-O size I was gunning for but the fast move missed most of my bids to cover by just a small margin and I saw my PnL levels quickly evaporating as the stock reverted back to my entry (in retrospect, a very normal pullback that just triggered me at the wrong time, as the stock would later continue in its trend). I screamed as loud as I could at the top of my lungs, slammed my desk, and chucked an array of small objects at the wall. I acted like a child, not getting what he wanted right away and thereby throwing a tantrum about it. </div>
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<a href="https://media.giphy.com/media/wvQIqJyNBOCjK/giphy.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="200" data-original-width="248" src="https://media.giphy.com/media/wvQIqJyNBOCjK/giphy.gif" /></a></div>
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My wife rushed over to ask what's wrong and tried to console me. In that moment, it was impossible to put my feelings into audible words. I just felt numb and empty, ready to topple over and collapse. You win, world. When the day ended, I was very profitable but I felt zero sense of achievement or inner character. I had enough of myself and the toxicity and the feeling that I am just this puppet to the gods of money who are demanding that I make as much money as possible otherwise I'm a piece of shit.</div>
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As I reflect on my behavior and my mindset, I see what had happened. I had created this fork in the road where there's no winning in either scenario<span style="font-style: italic;">—</span>either I go back to trading normal size and label myself as mediocre, or I continue to push for the wrong reasons and stay in a mental space of maximum volatility. How can you win playing this game? </div>
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The week after (this current week), I experienced a bit of an emotional hangover. I stopped looking at the note cards where I had scribbled down all this huffy-puffy nonsense about achieving my dreams and trading bigger size. They didn't push me anymore. The anger was gone. Whatever grievances I had from said "social interaction", they just stopped mattering<span style="font-style: italic;">—</span>I guess that's the stage of acceptance. I just traded like normal. The results were good. They were fine. I still didn't feel much joy from trading but I didn't feel like total shit either.</div>
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I'm not sure what the lesson is. Thanks for reading.</div>
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Ok I shouldn't end the post there. That's too bleak. I have started some reading about <a href="https://leadingrenewal.blogspot.com/" target="_blank">transcendent experiences</a> and how they can lead to true change. You can find it in monetary achievements but you can also find it connecting with people, connecting with nature, or finding growth in purely intellectual pursuits like philosophy. I'm not sure what the answer is or where I should go next. The next step in trading, if I ever get there (or even want to) isn't going to come from the ego and false inspirations. I have to really dig into how I felt connected to the pursuit of solving markets earlier in my career and find out what exactly gave me joy. If I can't find it again, then trading is just a job and that's that. Thanks for reading.</div>
<br />Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com28tag:blogger.com,1999:blog-8367859501985515786.post-20245308677523645222019-03-23T17:00:00.000-04:002019-03-25T08:50:25.151-04:00The CETC Situation: A Short Seller's NightmareLooks like I am in another unusual situation that is costing me money. I seem to have a knack for finding myself in these spots. And yet again I am the lucky one who gets to be the torchbearer for the cause. Let's get started.<br />
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<b>What is the situation with CETC?</b><br />
Let's first start off with defining the company. Hongli Clean Energy Technology Corp (CETC) is a Chinese reverse-merger company<span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;">—</span>these are usually pretty sketchy companies at best and outright scams at worst (see the documentary <a href="https://en.wikipedia.org/wiki/The_China_Hustle" target="_blank">The China Hustle</a>). They used to be known as SinoCoking Coal and Coke Chemical Industires (SCOK). I remember way back in the day SCOK trading from $5 to $45. These companies used to attract all kinds of speculative fervor until they were exposed by <a href="https://en.wikipedia.org/wiki/Muddy_Waters_Research" target="_blank">Muddy Waters</a> and other short sellers, and then it died down. But I digress.<br />
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CETC was experiencing a few problems at the time:<br />
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<ol>
<li><a href="https://www.sec.gov/Archives/edgar/data/1099290/000114420416128515/v450694_8k.htm" target="_blank">The company was non-compliant with NASDAQ listing regulations</a></li>
<li><a href="https://www.sec.gov/Archives/edgar/data/1099290/000114420416126101/v449708_nt10k.htm" target="_blank">The company hadn't filed its 2016 10-K in a timely fashion</a></li>
<li><a href="https://www.sec.gov/Archives/edgar/data/1099290/000114420417022358/v465264_8ka.htm" target="_blank">The company had changed its independent auditor</a></li>
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Needless to say, these are not the hallmarks of a well-run, profitable enterprise.</div>
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Now let's talk markets. On April 7th 2017, CETC's stock price spiked over 100% intraday without any news. </div>
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<img src="https://i.imgur.com/FIqaL5i.png" /></div>
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Traders, including myself, shorted the stock, betting the price would eventually go back down. Junk stocks that spike for no reason happen all the time and they usually do come back down.</div>
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At 12:15:58 Eastern Time, the price stopped moving. The Nasdaq had halted the stock for an "additional information request". These exchange halts are often to a response to unexplained speculative activity in "risky stocks". On the same day, the Nasdaq sent a Determination letter notifying the company of 1) the intent to delist the stock from the Nasdaq Capital Market and 2) the indefinite suspension of the trading of the company's stock due to its failure to comply with Nasdaq Listing Rule 5250c<span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;">—</span>the requirement to file timely financial reports with the SEC.</div>
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On October 6th 2017, CETC's common shares were <a href="https://www.sec.gov/Archives/edgar/data/1099290/000135445717000205/xslF25X02/primary_doc.xml" target="_blank">officially delisted from the Nasdaq</a>. It was removed from <a href="http://www.nasdaqtrader.com/Trader.aspx?id=Tradehalts" target="_blank">Nasdaq's official trade halts page</a> and is no longer considered a halted security.</div>
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The stock currently has no market. There is no way to close out a long or short position on the stock. The stock just exists in this weird limbo right now. It's just a piece of paper that cannot be exchanged for anything. </div>
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<b>So what is the problem?</b></div>
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The problem for short sellers is two fold.</div>
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1) With no market, there is no way to close out the security. Your money is tied up indefinitely due to the lack of a proper liquidation process.</div>
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2) Most (but not all) short sellers are on the hook for the short loan interest on the stock. You're effectively paying interest indefinitely on a security that no longer exists.</div>
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I have 6792 shares short of CETC. $33,960 in cash has been held as collateral for the position. I have since withdrawn the rest of the money and shut down all trading activity on the account. I guess the account isn't truly closed as long as this position exists on paper and I am still receiving statements.</div>
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I am getting charged almost $700 every single month in interest. </div>
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<img height="378" src="https://i.imgur.com/F95KQrC.png" width="640" /></div>
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This situation has existed before and was covered by Bloomberg's Matt Levine in this article:</div>
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<a href="https://www.bloomberg.com/opinion/articles/2018-04-11/-go-to-zero-isn-t-great-for-short-sellers" target="_blank">'Go to Zero' Isn't Great for Short Sellers</a></div>
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<b>What broker is my position on?</b></div>
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Centerpoint Securities, clearing via ETC or <a href="https://www.etc-clearing.com/" target="_blank">Electronic Transaction Corporation</a>. </div>
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Some traders are understandably frustrated with how these two parties have handled the situation. Having been a customer at Centerpoint since 2013, I'd like to think they are making a good faith effort towards rectifying this situation. I had an issue with them when LFIN was halted last year. I was short deep-ITM call options, the position was exercised (and thus my short call turned into a short stock position) without a proper update on my platform blotter, and I was on the hook for a very steep interest rate when the stock was halted. I wrote them a letter and they made good on the interest amount in question, as a gesture of good will. I don't know management well but their support team has always been prompt, professional, and respectful.</div>
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However, I cannot vouch for ETC. I don't really know what's going on them or what their internal policy is. Centerpoint has been going back and forth with ETC for me like a game of telephone. Here is what I do know:</div>
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<ol>
<li>They are partnered with brokerages that are popular among retail short sellers, such as Centerpoint, SureTrader and TradeZero. They have often been able to secure near unlimited short borrow on low float micro-caps stocks such as CETC and numerous others. Larger firms like Interactive Brokers, E*Trade, and Wedbush aren't able (or willing?) to do it as consistently as they do. I don't know what their methods are. </li>
<li>A couple years ago, Centerpoint enforced a number of trading restrictions on all ETC accounts<span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;">—</span>most notable being that all positions had to be closed out before the end of the day (no overnight positions). They said that these changes were in response in the firm's troubled balance sheet. You can read the e-mails in question <a href="https://imgur.com/a/RlqU66o" target="_blank">here</a> and <a href="https://imgur.com/a/X0a9pRL" target="_blank">here</a>.</li>
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Draw your own conclusions.</div>
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<b>You said "not all" traders in the same short are being charged interest. Who are these traders?</b></div>
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One trader who is clearing via Goldman Sachs. The prop firm I used to trade for clears through Goldman Sachs and I can confirm that they did not charge any traders for the period in which <a href="https://www.globenewswire.com/news-release/2017/06/07/1009651/0/en/Nasdaq-Halts-Wins-Finance-Holdings-Inc.html" target="_blank">WINS was halted.</a> How Goldman has the leeway to not charge interest while other firms do not, or whether they have only done this as a courtesy for relationship management purposes<span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;">—</span>I cannot answer.</div>
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There is another trader who is short a small position at a different broker that also clears through ETC. I have asked him to show activity statements to corroborate and he has. I don't know if this is a mistake or by design and at the moment I cannot explain this discrepancy. I am currently trying to contact this firm so hopefully I can provide an update here.</div>
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I will also add that traders at T3, Vision Financial, and Cobra Trades who are in the same position are also being charged indefinitely.</div>
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<b>Who is the money going to?</b></div>
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The money is supposed to go to shareholders who are loaning out the stock. I think some percentage of the interest goes to the clearing firm that cleared the stock borrow, but I'm not 100% sure on that. I'm trying to get more color on this.<br />
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(Update: my broker has told me none of the money goes to them or the clearing firm)</div>
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<b>What's going to happen when your balance goes to zero? Will you still be charged?</b></div>
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To me, this is a scary unknown. My broker has not clarified what exactly will happen when the interest finally drains my account equity to 0. If some party is willing to go after me at that point... well I don't even want to think about it.</div>
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<b>Why can't the broker just find a corresponding long position willing to match his position with your short position at a mutually agreed upon price?</b></div>
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This is a common suggestion and one of the first solutions I initially suggested when this happened. Here is the answer from my broker's representative:</div>
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<i>You can't cross the position out because since its halted you cant put prints on the tape.</i></div>
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Traders at Interactive Brokers may want to look into the Special Position Liquidation Agreement, as it was explained to me they have a mechanism to match positions in these unique circumstances.</div>
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<b>Why won't ETC mark the position to 0 like Goldman did?</b></div>
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Here is the answer from my broker:</div>
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<i>It's currently not being marked to 0 because the DTCC has not made it ineligible.</i></div>
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<b>Why can't the DTCC make it ineligible?</b></div>
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Here is the answer from my broker:</div>
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<i>FINRA was contacted and indicated we should work with DTCC. As you can see, DTCC is looking into this. In the past DTCC was not able to deem it worthless since the security has a Transfer Agent. </i></div>
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<b>Why can't the Transfer Agent simply withdraw his services?</b></div>
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Here is the answer from my broker:</div>
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<i>ETC is saying because they also have the longs, the agent has an obligation on that side as well, and long holders still know the last price as 4.64</i></div>
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The Transfer Agent on CETC is Interwest Transfer Company, Inc, who has since been acquired by <a href="https://www.issuerdirect.com/" target="_blank">Issuer Direct</a>. </div>
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<b>Can you move your position to another firm that doesn't charge interest?</b></div>
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Moving the position is possible. Finding a firm willing to do this out of the kindness of their heart is another issue. Opening an account with Goldman Sachs, if they would even agree to any of this, would likely come with an expectation of future business and a high minimum deposit.</div>
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My broker said this has been done before and the trader ended up being charged simultaneously at two firms because the actual borrow could not move over the books<span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;">—</span>so that's a risk as well.</div>
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<b>Are there any legal options?</b></div>
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There is a <a href="https://www.rosenlegal.com/cases-1121.html" target="_blank">class action lawsuit spearheaded by Rosen Securities</a>. One trader reached out to them and indicated to me they weren't much help. Unfortunately <a href="https://i.imgur.com/ngah0wJ.png" target="_blank">a lot of these lawsuits</a> are ultimately just for lead generation rather than a serious pursuit.</div>
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<br />
Some people have suggest some kind of FINRA arbitration. Some have suggested suing one of the regulatory agencies like Nasdaq. I don't know how viable these options are. I plan on speaking to a securities lawyer soon.<br />
<br />
Suing management directly would be difficult. To make a claim, you must serve with process, which is close to impossible if they are in another country.<br />
<br />
<b>Why can't they just list CETC on the Pink Sheets or Gray Sheets, like they did other worthless fraud Chinese companies?</b><br />
I think CETC's management has to file the proper paperwork for that to happen and they basically disappeared. They don't seem to care about having an exit for their worthless securities, even if it would end up being pennies on the dollar.<br />
<br />
It is possible this is all a nefarious scheme specifically designed to milk short borrow fees in perpetuity but so far I have no evidence to corroborate this theory. The simpler explanation is that weird unintended consequences just happen in our complex world and nobody knows what to do or who is supposed to handle it.<br />
<br />
I need more color on this issue and hopefully can find an update soon.<br />
<br />
<b>Does the SEC have any role in this?</b><br />
On September 18th 2018, <a href="https://www.sec.gov/litigation/apdocuments/ap-3-18785.xml" target="_blank">the SEC issued an Order Instituting Proceedings against CETC and 2 other companies</a>. There is supposed be an imminent update on these proceedings. I don't know if these proceedings will fix this issue, it seems to be a punitive order against the companies themselves.<br />
<br />
<b>Why is this allowed to happen?</b><br />
This seems to be an issue that needs systemic reform. Nobody seems to know what to do or how to implement a fair solution. One party passes the buck to another and we spin in circles. There used to be something called a Worthless Securities Working Group, with the purpose of achieving reform on this issue, but it has since disbanded.<br />
<br />
Right now it feels bleak because it's hard to visualize what the actual solution is supposed to be. It will take some patience. But it's somewhat encouraging to see all these traders come out of the woodwork and share whatever they can with me. The first step is putting the problem out there for everyone to see.<br />
<br />
Unfortunately that's all I have for now. I will update this when there's new information.Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com93tag:blogger.com,1999:blog-8367859501985515786.post-12197940305285664122019-02-23T01:24:00.001-05:002019-02-23T01:30:07.941-05:00Confession: I am a fraud<span style="font-family: inherit;">I have a confession to make. I am a fraud.
</span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;"></span><br />
<div style="-en-clipboard: true;">
<span style="font-family: inherit;">People talk to me. </span> Professional traders. <span style="font-family: inherit;">Aspiring traders. Hobbyist traders. People just kinda sorta interested in trading. Crypto-fiends asking me about bitcoin. Regular people asking me about where the stock market is going. Analysts pitching me ideas, hoping to get a fee for winning trade ideas. Progammers pitching me their services for automated strategies</span><span style="font-family: inherit;">, with me getting a split of the profits.</span></div>
<div style="-en-clipboard: true;">
<span style="font-family: inherit;"><br /></span></div>
<div style="-en-clipboard: true;">
<span style="font-family: inherit;">Some of these people—</span></div>
<div>
<span style="font-family: inherit;">They look up to me.</span></div>
<div>
<span style="font-family: inherit;">They respect me.</span></div>
<div>
<span style="font-family: inherit;">They ask me for advice.</span></div>
<div>
<span style="font-family: inherit;">And I think about that fact and I am in disbelief...<i>oh my god, why me?</i></span></div>
<div>
<span style="font-family: inherit;"><br /></span></div>
<div>
<span style="font-family: inherit;">I have twitter, a blog, and I was on a podcast once. Here's a clue guys: I don't know anything. These interactions where I am the giver of wisdom and advice... it all makes me feel an actual authority on trading when I am anything but.</span></div>
<div>
<span style="font-family: inherit;"><br /></span></div>
<div>
<span style="font-family: inherit;">If only these people knew what I knew. </span>If only they could witness, live, my complete and utter lack of composure, in real time. That <span style="font-family: inherit;">I say one thing and do another. I am not someone to listen to. If only you could see the trade I just made two minutes ago and how absolutely poorly thought out and impulsive it was.</span></div>
<div>
<span style="font-family: inherit;"><br /></span></div>
<div>
I am a fraud.</div>
<div>
<br /></div>
<div>
Okay, let's take a breath. My mind goes to dark places.</div>
<div>
<br /></div>
<div>
<strike>I am a fraud.</strike></div>
<div>
I am a very flawed trader...</div>
<div>
<br /></div>
<div>
I never wanted this blog to sound like an early 2000 junior high student's xanga. <span style="font-family: inherit;">You ever read someones blog and feel utter disgust at all the raw emotion being vomited out onto the page? Privileged person has first world problems, big deal. Too much emotion can be cringe worthy. You know how many times I've written something hyper emotional after the lousiest trading day ever just to delete it because I think about people reading it and thinking about what a crazy mess I am? Many, many times. I wanted my blog to be so much more</span>—<span style="font-family: inherit;">web comics, fun listicles about famous traders, stories about prop trading. A place where traders could learn and laugh. But I just can't get them done because I'm a <strike>fraud</strike> flawed writer. I can't execute to my standards. My FNMA post got 100k pageviews and I have all but squandered that momentum. But now it's time to face reality -- I am a hyper emotional trader and this blog is now about to be hijacked by my irrational internal drama.</span></div>
<div>
<span style="font-family: inherit;"><br /></span></div>
<div>
I am in the worst 12 month emotional cycle of my trading career. If you want a snapshot, it's below.</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/C443HZ7.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="542" data-original-width="800" height="432" src="https://i.imgur.com/C443HZ7.png" width="640" /></a></div>
<div>
<br /></div>
<div>
Keep in mind this isn't a profit chart.</div>
<div>
<br /></div>
<div>
<b>14 out of my 30 largest losses in my entire career </b>have occurred during the last 12 months. I wish I could say these losses were just a byproduct of taking increased risk on great trading ideas that were unfortunately proven wrong but I don't a single one falls in that category. It's almost entirely a calamity of errors and emotional trading. Since the two huge home runs in Feb/March, my highest winners haven't exceed my largest losers. Since September when my confidence completely fell apart, what I label as "large winners" have almost completely dried up. Since the start of 2019, my 5 largest losses are larger than my largest gain. It didn't use to be like this at all. I am still profitable month to month and mostly week-to-week and that's my only saving grace.</div>
<div>
<br /></div>
<div>
I have gone from thinking I made a huge leap in my trading to this sad, depressing purgatory where I'm not quite losing money but if I try too hard—which I inevitably will—I get absolutely put in my place by the market. If I put my head down and don't try too hard, I can grind it out.</div>
<div>
<br /></div>
<div>
There's so much drama and self-loathing in my trading. And I think it's just a phase. It's always been just a phase, an outlier, and then things get back to normal. Winners stay larger than losers. Large losers are rare. Sanity stays in tact. Then it does get back to normal... for a few days, maybe even weeks... until it doesn't.</div>
<div>
<br /></div>
<div>
So now I'm starting to think—<b>this might be the new normal. </b></div>
<div>
<b><br /></b></div>
<div>
Maybe this has always been me. </div>
<div>
<div>
Impulsive. </div>
<div>
Dramatic.</div>
<div>
Angry.</div>
<div>
Self-centered.</div>
<div>
Egotistical.</div>
<div>
Unbalanced.</div>
<div>
Off-kilter.</div>
<div>
Flawed.</div>
<div>
Broken.</div>
</div>
<div>
<br /></div>
<div>
Here's a sad truth. I don't work hard anymore. I haven't worked hard since like... 2015? I am describing all my mistakes and you know what I want to do about it? <b>NOTHING. </b>I want to ignore it and pray that sane me shows up for the trading day. I used to look at my end of day results religiously and now I'd rather jam a screwdriver in my eye. What used to be an every day habit is something I actively dread. It's like looking into a mirror to see how ugly you truly are. </div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/jmeUpJT.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="533" data-original-width="281" height="320" src="https://i.imgur.com/jmeUpJT.png" width="168" /></a></div>
<div>
<br /></div>
<div>
<br /></div>
<div>
<i>You chased that far? SHAMEFUL.</i></div>
<div>
<i>You got in an out of that trade in 49 seconds. WHAT WAS THE POINT?</i></div>
<div>
<i>LOL at being that slow to cover against a squeeze. Embarrassing. </i></div>
<div>
<br /></div>
<div>
Why even bother working hard? Nothing will ever change. </div>
<div>
<br /></div>
<div>
<div>
Growth mindset... Pfffft</div>
<div>
Getting better every day. Psh.</div>
<div>
Healthy habits and best practices... fuck that noise.</div>
</div>
<div>
<br /></div>
<div>
You're the same guy you were 10 years ago when you started. Same idiot who rage quit DOTA matches in college, screamed at bad beats in home poker games, and threw nintendo controllers at TV screns. You love this shit. You <i>love</i> the self-loathing and the wallowing in self-pity. You <i>want</i> to be angry. </div>
<div>
<br /></div>
<div>
<div>
New trading day. You do something dumb. You swear to yourself <b>NEVER AGAIN</b> and then two weeks later you forget "never again" and surprise, surprise, you do it again. </div>
<div>
<br /></div>
<div>
Hey, buddy, let's not fuck around next time with the "never again" ok? It's kind of insulting to keep deluding yourself with this totally hollow bullshit. Just fucking do it again already and feel like an asshole because in some sick way, maybe this is what you want. You <i>want </i>to bring yourself to the brink, over and over and over.</div>
</div>
<div>
<br /></div>
<div>
<div>
Risk it all already. Blow it all up. You've never done it, don't you want to know how it feels? All the Market Wizards say it's supposed to happen at the start. Maybe I'm a screwup because I skipped this necessary baptism. Whatever happens, you're going to getting something out of it.</div>
<div>
<br /></div>
<ol>
<li>You finally have your much needed "Come to Jesus" moment, get your act together, and maybe make the elusive leap that you've always wanted.</li>
<li>You quit trading for good because the loss was too traumatic. You know what?! Good. This shit makes me so unhappy, maybe I should just quit for good. I'll start a chatroom to pay the bills.</li>
<li>Maybe you get lucky on a ton of risk and make a lot of money?</li>
</ol>
<div>
<br /></div>
<div>
That's extreme. I'm not actually deliberating this. It's one of those perverse "lingering thoughts" like what happens if I jump off this tall building? I'm not going to do that.</div>
<div>
<br /></div>
<div>
The reality is far less dramatic. Negative thoughts make me depressed. How do I trade when I feel depressed? I actively try to sabotage any attempt at "trying too hard". Stay up as late as possible. Wake up maybe 10-20 minutes before the opening bell. Watch NBA highlights until 9:30. Don't go over any charts. Don't look at the news. Be ok with not trading at all because it sucks and it makes me sad. Find some stupid layup trade with small risk, take it with no expectations, walk into easy money, feel a vague pang of dissatisfaction maybe you could've made more, and then repress it by watching more YouTube or Netflix.</div>
</div>
<div>
<div>
<br /></div>
<div>
That's how easy it can be. I have been doing this for awhile. And that's why, despite all of this melodramatic writing that would make a casual reader think I lost all my money in some massive catastrophe, I still make money. I wish I could be this person all the time. I wish I could teach this person to actually be positive and grow and learn to love this job again.</div>
<div>
<br /></div>
<div>
My mental game is completely toxic right now and I don't know what to do to fix it. This is not a solicitation for your advice. Ask me what else is going on in my life—almost everything else besides trading is great and brings me joy and fulfillment but that doesn't make for fun writing does it? </div>
<div>
<br /></div>
<div>
This is not a post to suggest "this will happen to you too" post if you decide to trade for a living. I know plenty of level headed traders and they make me so jealous. I often have to reign in the urge to punch their stupid, happy faces.</div>
<div>
<br /></div>
<div>
I don't know how to neatly end this post. I'll write more tomorrow.</div>
</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com60tag:blogger.com,1999:blog-8367859501985515786.post-40526872039535112642019-01-12T13:29:00.003-05:002019-01-12T17:37:10.086-05:00This is what you get when you act like assholes.You ever been in a sorta-hostile situation where someone was throwing shade in a public setting but not quite crossing the line, so you couldn't quite escalate it? Maybe you just had to play along with it and parry away with words to stand your ground. But you couldn't make it <i>too serious</i> otherwise you look like the asshole or you risk getting your ass kicked.<br />
<br />
Well, I was playing poker on a cruise last week. $1/2 No-Limit $200 max at one of those electronic tables. Rake was ridiculously high (15% capped at $25) but the game was soft as a pillow factory to compensate.<br />
<br />
Four Chicago guys sat at the table. They had Bears hats and shirts on, one was even wearing a Khalil Mack #52 road jersey. The Bears were playing the Eagles in the playoffs that evening. One guy was a newlywed and this family cruise get together was either the wedding or post-wedding celebration.<br />
<br />
Immediately they just started firing chips away without ration or reason. We're talking...<br />
<br />
<ul>
<li>Open-shoving 50+ BB's preflop with trash hands</li>
<li>Call these open-shoves with as little as any Ace</li>
<li>Over-betting the flop with a 5x pot bet with weak hands like middle pair and pot committing themselves to showdown</li>
<li>Donating to each other simply because another family member was in the hand. "<i>Okay, you're in the hand so whatever, I'll call it!"</i></li>
</ul>
<div>
<br />
Just all kinds of donk behavior--you name it, it happened. I think <b>Newlywed Guy </b>had to reload at least 9 times. Newlywed Guy<b> </b>runs a dessert chain in the Midwest so maybe he's loaded. He didn't seem to care about money. So my mouth is just watering at this action. I don't even want to take smaller edges like calling an all-in with an AJ pre-flop. The throttle is firmly on fit-or-fold ABC mode. I'm not in the mood to lose any money trying to outmaneuver anyone. I'll let these guys blow up a pot with garbage while I got the goods. </div>
<div>
<br /></div>
<div>
So these guys are having a good time. I don't really care. If others want to gamble, I don't look down on that. Some people win by losing. It's not my job to tell them that they are losers. You won't catch me being *that guy* at the table--the tight nit telling everyone how they're playing bad. I am happy to watch the football game, sip on my free cocktails, sneak under the radar and play on auto-pilot. </div>
<div>
<br /></div>
<div>
Eventually I get to shove Ace-Queen against Ace-Ten on an ace-flop against <b>Fourth Guy.</b> I call him Fourth Guy because he is the most non-descript guy in this story and I don't think he's close family like the other three but conversation leads me to believe he's somehow connected to their party. Fourth Guy might be the worst player of the four, along with Newlywed Guy. He's the guy over betting on every flop. But he has been on a heater from the reckless all-in action and he's up nearly $800 (400 BB's).</div>
<div>
<br /></div>
<div>
So Fourth Guy picks up a straight draw on the turn and he needs one of my Queens on the river to win. There's a Jack and a King on the board. I say <i>"low card please".</i><i style="font-weight: bold;"> </i>The river is a Ten to improve him to two pair but to also improve me to straight, so I scoop it.</div>
<div>
<br /></div>
<div>
<i>"Wow look at that, he didn't want a ten but didn't realize it would help him." -- </i>remarked the bozo in the Khalil Mack jersey. Let's call him <b>Khalil Quack.</b></div>
<div>
<b><br /></b></div>
<div>
I just had to make the mistake of correcting him.</div>
<div>
<br /></div>
<div>
<i>"Nah man, I said low card. I didn't say anything about a ten."</i></div>
<div>
<i><br /></i></div>
<div>
<i>"Don't tell me what you said. I heard what you said."</i></div>
<div>
<i><br /></i></div>
<div>
Woah, okay guy. This is the first sign of tension all night. The comment raised my eyebrow a bit but I chose not to respond to it. I'm still barely ahead of my first buy-in at this point. He's been drinking, drunk people say drunk things--so I figured.</div>
<div>
<br /></div>
<div>
I take a few more large pots against Newlywed Guy and Fourth Guy. My night is starting to go on a roll. Fit or fold poker is working just fine, hands are playing themselves, no thinking required. </div>
<div>
<br /></div>
<div>
And then things get more tense.</div>
<div>
<br /></div>
<div>
<i>"I want a piece of this guy." </i>-- Khalil Quack, giving me some side-eye after I scoop another pot.</div>
<div>
<br /></div>
<div>
<i>"Look at him, he is so serious</i>. <i>If he bets it he has it. That's all he does</i>" -- this is <b>Daddy's Boy. </b>He's a skinny 20-something with a peach fuzz, son of Newlywed Guy from a prior marriage. He could very well be straight out of college. He's a little ahead of breakeven and the only reason is because his dad calls his shoves with trash because "it's all my money anyway, so I'll gamble!" Khalil Quack is a slightly older, slightly bulkier cousin. They sit next to each other and seem tight.</div>
<div>
<br /></div>
<div>
Okay, I'm starting to feel uncomfortable. Let me add this: I make a deliberate effort not to have a serious table image. I grew up playing poker (and video games, sports, etc) with everyone knowing that I was the intense, competitive type. Later on, I understood that this wasn't a good thing in terms of keeping the table playing loose and fast. So when I play poker, I try to do the following things:</div>
<div>
<ol>
<li>Watch whatever game is on and try to make it look like I care about more about that. <i>"What a dime that was! Terrible call! How is that a penalty?! Let's see what the replay shows. How can you not use your timeout there?!" </i>I'll be verbal about it. I think I paid more attention to the game than they did, despite them being such "huge fans"</li>
<li>I try to Ooh and Awe over bad beats, big pots, and crazy river cards--even though I've seen it all at this point and am largely unmoved by it.</li>
<li>Smile more</li>
<li>Chat with people</li>
</ol>
<div>
And I think I was doing all that. There wasn't any need to go into the tank and stare anyone down--every hand plays itself when your opponents are that level of bad. So why are these guys talking about me?</div>
</div>
<div>
<br /></div>
<div>
<i>"I'm just playing poker</i>. <i>My lucky night I guess." </i>-- as I guffaw and try to diffuse this nonsense. It didn't work. </div>
<div>
<br /></div>
<div>
The next hour would unfold like this:</div>
<div>
<ol>
<li><i>"Cmon man, show your hand, let's see what you got for once! Don't be scared!" </i>anytime I had a chance to show vs. muck.</li>
<li>More accusing looks and proclamations that I'm "such a serious guy"</li>
<li>I bet $5 on the flop with a middle pair, ace kicker. <i>"Oh man, is he trying to bluff?" </i>says Daddy's Boy, who then raises $30 against a $15 pot. I fold and Khalil Quack says <i>"You're too cute to bluff." </i>Wow.</li>
<li>I tell them my team plays next week (the LA Rams, though I didn't specify), to which Daddy's Boy replies <i>"I don't give a shit about soccer."</i> (IMO, it says a lot about someone's beliefs when they go out of their way to bash soccer)</li>
<li><i>"Look at him take another sip of Shirley Temple." </i>(in reference to a pink "unmanly" cocktail I was drinking). Said maybe four or five times.</li>
<li>I get out of my seat and Daddy's Boy asks where I'm going. Then he sneers <i>"He's so nervous, he has to get up and stand." </i>I can't even stand up and stretch without disrespect.</li>
<li>I try to act unaffected and I say <i>"Hate away guys, I have all the money at the table." </i>Khalil Quack repeats what I said in a more feminine voice and Daddy's Boy, with his douchey shit-eating grin, says <i>"Oh my god, you got his voice down, so funny."</i></li>
</ol>
<div>
At this point I'm fuming. It's just constant disrespect over and over. Little barbs all over, and now starting to get personal. Happening to no one else but me. They're trying to emasculate me, bully me, goad me. Completely uncalled for and for no real tangible reason. We haven't even played that many pots together, as I have mostly taken my money from the other two guys (who, to their credit, weren't really participating in this nonsense).</div>
</div>
<div>
<br /></div>
<div>
My heart starts to beating a little faster. I'm ready for them to cross the line and am rehearsing what to say in my head. Should I be witty? Should I try to look like a bad-ass? Should I be icy-calm and poised or just let it all out? Deep down I want to throw down the gauntlet and just shout:</div>
<div>
<br /></div>
<div>
<b><span style="color: #cc0000;">WHAT THE FUCK IS YOUR PROBLEM?</span></b></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div>
But I don't because then I'll look like the asshole, because I know they'll just laugh and say I'm taking things too seriously. Or maybe they'll get physical. So I can't quite go there. It's such bullshit. </div>
<div>
<br /></div>
<div>
So we play on. They stare me down, I stare right back at them. They say something, I say something back. They challenge me, I tell them I'll take them on all night. We go back and forth and they keep making it seem like harmless locker room talk. I know what it is and it's not that. Such bullshit.<br />
<br /></div>
<h2>
MEANWHILE...</h2>
<div>
<br /></div>
<div>
There's a game going on and it's a good one. The Bears are up 15-10 on the Eagles in the fourth quarter with a minute to go. It's 4th and Goal, Eagles Ball on the Chicago 2 yard line.</div>
<div>
<br /></div>
<div>
"Big Dick" Nick Foles conjures up his Playoff Black Magic and hits Golden Tate for a touchdown.</div>
<div>
<br /></div>
<div>
<i>"NO. FUCK!" </i></div>
<div>
<br /></div>
<div>
Khalil Quack and Daddy's Boy are in shambles. </div>
<div>
<br /></div>
<div>
SO GOOD, BABY. Fuck you. Fuck you. Fuck you. Fuck you. Fuck you a billion times.</div>
<div>
<br /></div>
<div>
But then Tarik Cohen has a great kick return and the Bears are already in striking position. They get a couple first downs to lock down field goal range. Cody Parkey comes out and lines it up. The two idiots at the table watch in great anticipation. </div>
<div>
<br /></div>
<div>
<i>"Timeout"</i><b style="font-style: italic;"> </b>I say, and then Parkey kicks it through the uprights. Coaches always try to freeze the kicker in these situations. C'mon dude, every real fan knows this.</div>
<div>
<br /></div>
<div>
Khalil Quack, who can barely pay attention even though it's his team in a must-win playoff game, fist pumps and shouts thinking they've won it. Nope.</div>
<div>
<i><br /></i></div>
<div>
<i>"Oh fuck they called a timeout?" </i>Yes they did, moron.</div>
<div>
<br /></div>
<div>
No timeouts left for Philly and here comes the real kick.</div>
<div>
<br /></div>
<div>
I'm begging the football Gods. Telepathically speaking to the television. I want PAIN. <b>I want THEIR PAIN on a PLATTER.</b><br />
<i><br /></i>
<i>Fucking do it. Crush their hearts RIGHT FUCKING NOW.</i></div>
<div>
<br /></div>
<div>
<iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/gqOYkapAYeI/0.jpg" frameborder="0" height="400" src="https://www.youtube.com/embed/gqOYkapAYeI?feature=player_embedded" width="480"></iframe></div>
<div>
<br /></div>
<div>
<b>DOINK.</b></div>
<div>
<b><br /></b></div>
<div>
<b>AHAHAHAHAHHAHAHA... </b></div>
<div>
<b><span style="font-size: large;"><br /></span></b></div>
<div>
<span style="font-size: large;"><b>HA</b><b>HAHAHAHAHAHA!!!! </b></span></div>
<div>
<b><br /></b></div>
<div>
Satisfaction at last. </div>
<div>
<br /></div>
<div>
Danilo L and Anthony L--the pain on both of your faces... PRICELESS. You two are complete trash.</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com52tag:blogger.com,1999:blog-8367859501985515786.post-80370730271048520642018-12-24T17:32:00.002-05:002018-12-26T16:25:51.404-05:00I'll Have One Dip Buy, Please.Greetings everyone. I hope you're all having a fabulous holiday week.<br />
<br />
As I'm sure you are aware of, the S&P 500 is currently down 600 handles from the all time highs and this will very likely be the first year we close red since 2008.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/kpwlBxm.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="430" data-original-width="800" height="285" src="https://i.imgur.com/kpwlBxm.png" width="520" /></a></div>
<br />
<br />
Gulp. That's a pretty bad candle.<br />
<br />
This is the daily chart:<br />
<br />
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<a href="https://i.imgur.com/Sj1L4y5.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="435" data-original-width="800" height="285" src="https://i.imgur.com/Sj1L4y5.png" width="520" /></a></div>
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<br /></div>
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I hope this is not ruining the holiday cheer for anyone, but if it is, here's the good news: </div>
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<br /></div>
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There's a big opportunity here.</div>
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<br /></div>
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I know what play I want to make on the market. I want to buy into an extreme move and then sell it higher. I specialize in short-term trading. Whatever money I missed out on not going all-in long indices or FANG 3 or 5 or 10 years ago, is the money I want to make in a few days or even a few hours. I may or may not actually execute a winning trade, because trading is difficult and you don't always get what you want nor do you always end up following your plan to a tee. I have no position at the moment.</div>
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<br /></div>
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Here is a list of things I don't care about as far as forming my trade thesis or constructing my entries and exits:</div>
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<br /></div>
<div class="separator" style="clear: both; text-align: left;">
1. Trump's tweets</div>
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2. What the Fed is doing</div>
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3. Whether it's still a bull market with all-time highs ahead in the near future</div>
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4. Whether it's now a bear market and there are lower prices ahead in the near future</div>
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5. Whether everyone on Twitter is bullish and thus we "have to go lower"</div>
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6. Whether everyone on Twitter is bearish and thus "the bottom is in"</div>
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7. #4/5 except replace Twitter with CNBC or Retail Investors or Dennis Gartman, or anyone</div>
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8. Death crosses</div>
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9. Macro-economic data</div>
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10. Historical ratios like P/E or yield</div>
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11. Analyst price targets</div>
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12. Trade war or Tarifffs</div>
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13. Politics</div>
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14. "Why" we went up the last 9 years, whether because of QE manipulation or "real buying" or whatever popular narrative that's out there</div>
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<br /></div>
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There are some things on that list, namely #3 and #4, that I have some opinions about that might guide me in a different context but doesn't matter yet.</div>
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<br /></div>
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There is one thing I care about and it affects my risk tolerance and conviction level. It belies why I am interested in this trade at all.</div>
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<br /></div>
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U.S. equities have been in a centuries long uptrend and buying the dip is basically an undefeated trade. It has survived multiple World Wars, The Great Depression, The Cold War, Watergate, 9/11, 2008, and whatever else you can name. While most citizens of other countries view their stock market as gambling, buy and hold has become an American cultural phenomenon. There are "bigger forces" at play here that are not to be easily dismissed.</div>
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<br /></div>
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For the average investor, it will probably work out to buy at these levels. That being said, I don't want to be too early because I lack the patience to endure the potential years of drawdown in order to let this trade work out. Entries and exits will matter. Leverage and timing are either going to be my best friends or my worst enemies on this trade.</div>
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<br /></div>
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I see it like this. I see a rubber band. It's stretching a too far to the downside. At some point, it will release and go the other way just as violently, regardless of anything above. What happens after that--when the rubber band snaps back and then loses it stretch in either direction--is not something I need to know.</div>
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Merry Christmas and happy trading to all in 2019. One goal for 2019 will be to write more frequently.</div>
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<br /></div>
<h3 style="clear: both; text-align: left;">
December 26th Addendum:</h3>
<div>
<br /></div>
I made one trade so far. A very modest day trade on a 3x ETF, far cry from the potential profit one could infer I wanted from the above post. Equivalent move on SPY was 236 to 240.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/3813mJT.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="412" data-original-width="639" src="https://i.imgur.com/3813mJT.png" /></a></div>
<br />
<b>4:00pm</b> update: ..well those exits were quite bad.<br />
<br />
I might post other charts, I might not.Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com531tag:blogger.com,1999:blog-8367859501985515786.post-25213945277665391342018-12-13T19:09:00.002-05:002018-12-17T11:50:48.444-05:00The "Should Have" Trade That I Will Regret ForeverYou ever think about the one that got away from you?<br />
<br />
It could be anything.<br />
<br />
<b>An amazing business opportunity. </b><br />
The partnership stake in a unicorn startup, that you sold for pennies on the dollar to fund a steady career in advertising.<br />
<b>An amazing partner.</b><br />
The perfect college sweetheart you broke up with to "find yourself" on a year long trip to Europe.<br />
<b>A grand achievement at the highest level.</b><br />
The final hurdle to win a gold medal but you tripped over, seeing your dreams slip away in your short and finite athletic prime.<br />
<br />
So for us traders, there was that trade that you missed. And you will experience severe regret as you see an explosive moves away from the entry level that you considered and decided to passed on, you IDIOT.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/hsF3lVY.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="397" data-original-width="480" height="330" src="https://i.imgur.com/hsF3lVY.png" width="400" /></a></div>
<br />
<br />
But here's the good news: the longer you trade (and the better you become as a trader), the longer the list grows of all your missed trades. Your trading memory will start to eat up a lot of free space. These missed trades will become a big jumble of charts in your head and few, if any, will stand out. It won't sting so much as time passes.<br />
<br />
Here's another thought as well: anything can be a "legendary trade" if you put enough capital or leverage behind it. Every week there are options going up 500-1000%. Every week there's some dumb low float trash going up 100% or more. Every quarter, there's an explosive breakout from earnings. Someone out there must have had the risk appetite and conviction (or just dumb luck) to have made money on one of these moves. It doesn't feel like a rare event if it keeps occurring so often.<br />
<br />
Nonetheless, I do think we all have some missed opportunities and regrets that stand out, even after all these years.<br />
<br />
<i>But Peter, I have no regrets. Life is a learning opportunity and all my mistakes have contributed to who I am today and thus I have no true regrets--</i>yeah shut up. I hate you people and your positive, resilient attitudes. I have regrets and I want to whine about it, like a normal person, okay?<br />
<i><br /></i>
There is one missed trade that will stay with me for a long time. It made the headlines last year:<br />
<br />
<h3>
<a href="https://www.cnbc.com/2017/06/22/ethereum-price-crash-10-cents-gdax-exchange-after-multimillion-dollar-trade.html" target="_blank">Ethereum flash crashes to $0.10 on GDAX</a></h3>
<div>
<br /></div>
So for the unfamiliar, here's a short recap of what happened:<br />
1. Someone entered a <a href="https://www.investopedia.com/terms/f/fat-finger-error.asp" target="_blank">fat-finger </a>"multi-million dollar market sell" order<br />
2. There was not enough liquidity on the market depth to absorb this move<br />
3. Stop loss orders and margin call liquidations caused another chain reaction of sell orders, exacerbating liquidity issues<br />
4. The price cleared all the bids on the order book all the way down to <b>$0.10.</b><br />
<b><br /></b>
And I was fortunate to be at my computer to watch it unravel in real time. Behold...<br />
<br />
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<a href="https://media.giphy.com/media/lbxj6EKjiDlYs/giphy.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="344" data-original-width="480" src="https://media.giphy.com/media/lbxj6EKjiDlYs/giphy.gif" /></a></div>
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<br /></div>
<br />
I stared at it.<br />
<br />
<i>Shit.</i> That was my moment!<br />
<br />
I started entering in orders to try to take advantage of any subsequent mini-crashes on what was, at the moment, a super thin bid. I did catch some decent scalps but within an hour, the market started to stabilize. <b>I knew that the moment for an all time stroke of genius had come and gone in the blink of an eye.</b><br />
<br />
<a href="https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-losses-caused-by-the-ethereum-flash-crash/" target="_blank">Coinbase would later rule for all trades to stand and would reimburse all losses caused by the flash crash.</a> They would also remove the margin trading feature, which has since yet to return.<br />
<br />
I had a lot more than $350 in my GDAX account and I was mostly a scalper during the time so I held a lot of cash rather than crypto. I don't know if it would have been a trade I could retire on but it would've been pretty damn cool to blog about it after the fact.<br />
<br />
Look, I know what you're thinking. This is the type of trade where every Joe Schmo is thinking after the fact, "<i>oh man, why didn't I think of that</i>?" Well, the reason this specific trade resonates with me the most is because<b> </b>once upon a time...<br />
<h3>
<br /><b>I was that guy buying flash crash prices on wild west crypto exchanges</b></h3>
<b><br /></b>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-EniVSD2WFvk/XAv1U_-p2bI/AAAAAAAAGI4/vvqO0_IrOig7CnD7xbU2NKOwLHAdxHg8gCLcBGAs/s1600/bitfinex%2Bflash%2Bcrash%2Bprints.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="509" data-original-width="943" height="344" src="https://3.bp.blogspot.com/-EniVSD2WFvk/XAv1U_-p2bI/AAAAAAAAGI4/vvqO0_IrOig7CnD7xbU2NKOwLHAdxHg8gCLcBGAs/s640/bitfinex%2Bflash%2Bcrash%2Bprints.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">screenshot saved from 2013</td></tr>
</tbody></table>
<br />
That was me buying at $20 on Bitfinex, $80 below the actual trading price. I saved that picture.<br />
<br />
<i>Oh my God, did I really get printed there!? THAT'S FREE MONEY BABY!</i><br />
<br />
It was <span style="font-weight: bold;">April 12th 2013 </span>and the bitcoin bubble had burst. (Where have you heard that one before?)<br />
<br />
<a href="https://i.imgur.com/tMSFyXK.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" data-original-height="329" data-original-width="412" height="255" src="https://i.imgur.com/tMSFyXK.png" width="320" /></a><br />
<br />
Bitcoin is trading around $55-120, depending on what exchange you looked at, after a massive crash from $260. The biggest exchange, Mt. Gox, had been halted for several days, passing on the process of price discovery onto fragmented, inefficient and thinly traded exchanges.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://i.imgur.com/JKJJTB2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="235" data-original-width="800" height="187" src="https://i.imgur.com/JKJJTB2.png" width="640" /></a></div>
<br />
<br />
My primary exchange was bitfinex since they had leverage and shorting. They were not that popular yet though so it was trading with low volume and large spreads. 10-20% bid-ask spreads were not unusual at the time. Typically, that's a sign for an active trader to stay away. But I didn't care for conventional wisdom. I didn't care for safety. To my startling observation, other traders were frequently paying through the spread with market orders and spraying way past the best bid and best ask. It was total amateur hour.<br />
<br />
So, there I am with my small cash deposit and nothing to execute trades rapidly except my own hands, stepping in to make markets of this thing people called a "crypto currency"--the existence of which I didn't even fully comprehend quite yet. I would place multiple orders on both sides of the book and pray that the market didn't rip against me too much and margin call my ass.<br />
<br />
I had no method, no pricing model, no process. It was all guessing--just try to turn over my money as many times as possible and catch spreads. 8<i>0x90, I'll step in at 83 since I need to buy, sure</i>. If the market moved away from me, I'd scale into more of my net position (could be long or short) and raise the other side to try to reduce my exposure. I figured market making is just about reducing directional risk over time. Don't let an adverse move eat you up.<br />
<br />
Part of my routine was having to constantly refresh the Bitfinex trading log (time and sales) to see how trades printed because many of the real time chart API's were temporarily down. That's what trading crypto was like back in 2013--primitive, unreliable, broken.<br />
<br />
After what might've been my 893th refresh of the night, <b>I saw the magic happen</b>. That was me sitting at $20, getting printed for 38.9 bitcoins. <b>BOOM.</b><br />
<br />
I sold them all near $100 within minutes and realized about $3000 in the profits on that one round-trip alone.<br />
<br />
All in all, I made about $5000 in a few hours of trading, which was incredible at the time because at that time, $5000 was a good month in stock trading for me. This wasn't a great time for me personally. I had thought about quitting this whole trading thing and moving back to California and it was killing me inside. This night alone lifted me out of depression.<br />
<br />
For the next months, if I ever had spare capital, I made it a purposeful habit to always have low bids entered into bitcoin... <i>because</i> y<i>ou never know when she might say YES.</i><br />
<i><br /></i>
<br />
<h3>
Seeds of the Idea</h3>
<div>
<br /></div>
Unfortunately the magic print never happened again. I made decent money with more conventional trading on the run to $1200 and then I stopped trading crypto altogether in 2014. It was a bear market and I had lost interest. Then I came back to crypto in May 2017, a little late but not too late. That's probably a post for another time.<br />
<br />
But man. Think about it!<br />
<br />
It's not just hindsight. The seeds of knowledge and experience were there for me to place an extremely low "just in case" bid and capitalize on that opportunity. Imagine reveling in your genius of being able to put it all together and just do something so simple, something that takes zero work and zero risk... and then the impossible happens and you take a small fortune out of it. And I couldn't do it! For whatever reason, I just stopped doing what I used to do. I stopped believing it was possible. But in a young, disorganized, chaotic, inefficient market--<i>anything is possible</i>.<br />
<br />
This is why I will always take the chance on new frontiers of market opportunity. You just never know how you can make money. It isn't always a matter of needing a bias that something will go up meaningfully higher or meaningfully lower. There might be these unknown inefficiencies that you can brainlessly exploit with close to no risk at all. That's also why I took the risk on the overseas broker that shall not be named, for those of you who were fortunate enough to read my last blog post (now deleted).<br />
<br />
A lot of traders love that feeling of being right.<br />
<br />
They made the right call.<br />
They told everyone on twitter that that piece of shit stock was going to 0 and it did.<br />
They screamed at the top of their lungs on CNBC that this stock would go to the moon and it did.<br />
I was a bull and I beat those idiot bears. I was a bear and I beat those stupid bulls.<br />
I was a contrarian and told the crowd to go suck it and they did.<br />
<br />
We all want to be George Soros, breaking the Bank of England on a generational macro call. Hey I won't lie, I like that feeling too. I just think it's overrated. I like another feeling a lot of better.<br />
<br />
<i>"That was too easy. I feel like a bank robber". -- </i>this is something I say to my trader friends when the trade is a little too easy.<br />
<br />
<i></i>I like that feeling after a trade where I feel I just got away with a heist for a $100 million diamond and no one was the wiser. I'm taking off my ski mask and high fiving my entire crew for a job well done. <b>It was THAT EASY</b>. I didn't need to pontificate upon the wisdom of the crowd or prognosticate the future. I didn't have to be Soros or Livermore. I didn't need to lay out the risk. I didn't need to worry about some bullshit squeeze or shakeout or stop out. I just took the sack of money off the ground and ran as fast as I could. I love that feeling more than any other feeling. There should be a German word for it.<br />
<br />
That should have been me as I hurried to transfer all my stolen ten cent ethereum off GDax and sell it on another exchange. Should have. Now it's just a missed trade that I'm blogging about like a loser.<br />
<br />
I don't regret not buying bitcoin at $30.<br />
<br />
I don't regret not buying ethereum at $10.<br />
<br />
I do regret not buying ethereum... at $0.10.<br />
<br />Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com19tag:blogger.com,1999:blog-8367859501985515786.post-26576508002923328622018-09-06T18:10:00.001-04:002018-09-06T18:33:21.471-04:00Different Type of EdgeI have a bit of an edge to me--an angry edge. Had it ever since I was a little boy.<br />
<div>
<br /></div>
<div>
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. </div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
I charged at him and forearm-shoved him to the ground. Asked him what's up.</div>
<div>
<br /></div>
<div>
<i>What's your problem dude?!</i></div>
<div>
<i><br /></i></div>
<div>
I still remember his face. He was shocked. He reacted like a whiny little bitch.<br />
<br />
<i>Nothing! Fuck you!</i><br />
<i><br /></i>
Returned a little bitch shove that knocked me back a half step. Nothing else. Pfffft. That's all you got?</div>
<div>
<br /></div>
<div>
When lunch ended we shook hands and that was that-we never had a beef again.</div>
<div>
<br /></div>
<div>
I stood up to a bully. Knocked him on his ass, demanded respect, and was given respect. </div>
<div>
<br /></div>
<div>
That's a good story. That's a narrative that can sell.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
There's an ugly side to this edge.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
There's the dent in a waste basket that I kicked over and over again at the prop trading desk.</div>
<div>
<br /></div>
<div>
There's the hole in the wall at my old apartment in FiDi.<br />
<br />
Spoiled, entitled brat all pouty because he doesn't get what he wants. That's the picture being painted there.</div>
<div>
<br /></div>
<div>
I really hate losing.</div>
<div>
<br /></div>
<div>
I hate it.</div>
<div>
<br /></div>
<div>
It just wrecks me on the inside.</div>
<div>
<br /></div>
<div>
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).<br />
<br />
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.</div>
<div>
<br /></div>
<div>
<b>The Next Day</b><br />
<b><br /></b></div>
<div>
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.</div>
<div>
<br /></div>
<div>
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".</div>
<div>
<br /></div>
<div>
Fuck that shit, <b>I am going to take this very personally.</b></div>
<div>
<br /></div>
<div>
The market gets to live rent free in my mind.</div>
<div>
<br /></div>
<div>
<i>I'm the little bitch who moved his stop to break even and got ticked out.</i></div>
<div>
<i><br /></i></div>
<div>
<i>I'm the idiot who didn't take any profits on a big move</i></div>
<div>
<i><br /></i></div>
<div>
<i>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></div>
<div>
<i><br /></i></div>
<div>
<i>I'm the idiot who said he wouldn't trade these <a href="https://t.co/dw1K1TK4vE" target="_blank">nasty "hero setups"</a> anymore but didn't have the character to stay true to his word</i><br />
<i><br /></i>
<i>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.</i><br />
<i><br /></i>
<img alt="stick figure obama GIF" src="https://media0.giphy.com/media/RXE1KkfWFcsso/200.webp" /><br />
<br /></div>
Ugh.<br />
<br />
There are <b>6am next days, 8am next days, and 9:29 next days.</b><br />
<b><br /></b>
<b>6am.</b> <i>I can't have ENOUGH of this market! I LOVE IT!!!</i><br />
<b>8am.</b> <i>Clock in, check the news, do your thing. All professional.</i><br />
<b>9:29am.</b> <i>I hate trading.</i><br />
<br />
Tomorrow is gonna be a 9:29 day.<br />
<br />
I hate losing.<br />
<br />
I hate the next day.Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com25tag:blogger.com,1999:blog-8367859501985515786.post-42872269828761287682018-08-31T11:07:00.001-04:002018-08-31T11:26:25.837-04:00Button Pushing Fast TraderSo 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.<br />
<blockquote class="twitter-tweet" data-lang="en">
<div dir="ltr" lang="en">
How do you execute trades?</div>
— Pete (@peterkto) <a href="https://twitter.com/peterkto/status/1034930603056095232?ref_src=twsrc%5Etfw">August 29, 2018</a></blockquote>
<script async="" charset="utf-8" src="https://platform.twitter.com/widgets.js"></script>
<br />
I'm a bit surprised that--given that my audience is mostly "active traders"--only 21% use hotkeys.<br />
<br />
That means a whole lot of you are missing out on the experience of being a speed demon on the keys.<br />
<br />
As well as being a <b>button pusher</b> and the residual effects of being a button pusher.<br />
<br />
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.<br />
<br />
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.<br />
<br />
But then in less than a minute, his PnL catches up to mine on the symbol.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-YE9Ul5CS0Ek/W4lR1PJ4qUI/AAAAAAAAFkk/4LHrKaj4LhgF5rzCFZhnTJL6dEEMk2gNACLcBGAs/s1600/cron%2Bimbalance.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="487" data-original-width="775" height="250" src="https://2.bp.blogspot.com/-YE9Ul5CS0Ek/W4lR1PJ4qUI/AAAAAAAAFkk/4LHrKaj4LhgF5rzCFZhnTJL6dEEMk2gNACLcBGAs/s400/cron%2Bimbalance.PNG" width="400" /></a></div>
<br />
<br />
<i>Wow, huge buy imbalance, indicated a point higher.</i><br />
<i>I bought 30k at 11.60 and sold into 12.</i><br />
<i>I just made $9000 off that move.</i><br />
<br />
Oh okay. Nice job.<br />
You sneaky fuck.<br />
You goddamn bank robber.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
Can you do that with just point and click?<br />
<br />
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.<br />
<br />
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.<br />
<br />
<b>Psychological drawbacks</b><br />
<ol>
<li>Unwillingness to take pain. Thinking you can time every move to a tee, so you don't give positions any room to breathe</li>
<li>"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. </li>
<li>Too much button clicking without purpose, start asking yourself "what am I doing" as fees rack up, feel demoralized</li>
<li>Thinking speed can be the edge on a low margin trade. <i>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.</i></li>
<li>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</li>
</ol>
<div>
<b>Advantages</b></div>
<div>
<ol>
<li>Take advantage of special situations to size up quickly with low risk</li>
<li>Better at scalping</li>
<li>More efficient at filling orders (more important when trading size or on a thinner stock with wider spread)</li>
<li>Better feel for how liquidity moves in a stock</li>
<li>Can manage more positions</li>
<li>Certain strategies are enhanced -- news trading, imbalance trading</li>
</ol>
</div>
<div>
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.</div>
<div>
<br /></div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com30tag:blogger.com,1999:blog-8367859501985515786.post-36651570941178315772018-03-30T15:46:00.002-04:002018-03-30T16:07:03.724-04:005 Interesting Trades I Made in College: Buying Gold BullionThere are five trades I want to reflect on from my college days. Each trade represents a new trading phase. And I went through <i>many </i>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.<br />
<div>
<br /></div>
<div>
<div>
You don't know if you'll like it until you actually do it. </div>
</div>
<div>
<br /></div>
<div>
Here are the five trades.</div>
<div>
<br />
<ol>
<li>Buying gold bullion in 2008</li>
<li>Buying AAPL when Steve Jobs announces medical leave (don't ask me where I sold it)</li>
<li>Buying a small biotech with a drug that... cured laughter??</li>
<li>Shorting AIG after it went from $6 to $40</li>
<li>Shorting some scam micro-cap called InfoLogix</li>
</ol>
<div>
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...<br />
<br /></div>
<div>
<h2>
<b>Buying Gold Bullion in 2008</b></h2>
<div>
<b><br /></b></div>
<div>
This is the time I went full gold bug. </div>
<div>
<br />
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 <a href="https://www.hbo.com/movies/too-big-to-fail" target="_blank">Too Big to Fail</a>, you know what I'm talking about.<br />
<br />
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.</div>
<div>
<br /></div>
<div>
2008 Peter To was a hardcore libertarian. Non-stop. This was his soap box at the time.</div>
<ol>
<li>Vote Ron Paul otherwise you're just voting for the evil government-loving Republicrats</li>
<li>No bailouts or nationalization! I say let them fail and see what happens. MORAL HAZARD!</li>
<li>End the Federal Reserve! Bunch of no-good money printers stealing my wealth.</li>
<li>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. </li>
<li>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 <b>FUCKED</b>. That was my narrative.</li>
<li>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!</li>
</ol>
<div>
2008 Peter obviously knows everything about the world and how it works. And hyperinflation is <i>so obviously</i> 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?</div>
<div>
<br /></div>
<div>
<b><a href="https://i.imgur.com/OIU6kvF.png" target="_blank">He buys gold, baby.</a></b></div>
<div>
<b><br /></b></div>
<div>
Oh, like a gold ETF or gold futures where he can trade it and avoid high transaction fees? No.</div>
<div>
<br /></div>
<div>
Fuck that shit. He buys <i>actual gold coins</i>.<br />
<br />
<img alt="coins GIF" src="https://media3.giphy.com/media/MkvZFvzHIWbRK/giphy.gif" /></div>
<div>
<br /></div>
<div>
Because once the economy collapses, those fraudulent paper vehicles will never deliver! Fake gold! You need the real thing that you can touch damnit! </div>
<div>
<br /></div>
<div>
That's what doomgold666 on thesilverforum.com said and he has 15,000 posts in the 9 months so he seems pretty credible.<br />
<br />
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 <b>"I told you so!"</b> </div>
<div>
<br /></div>
<div>
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?<br />
<br /></div>
<div>
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?<br />
<br /></div>
<div>
Let's see how this trade turned out, in four panels.<br />
<br />
<b>ENTRY.</b><br />
<b><br /></b></div>
<div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-Z-X87DhQwXg/Wr6Eoik4l0I/AAAAAAAAEfM/1MvLpikhzZA5Nvxr4UwI0aCgsfZbXqQBgCLcBGAs/s1600/gold%2Btrade%2B1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="493" data-original-width="807" height="390" src="https://4.bp.blogspot.com/-Z-X87DhQwXg/Wr6Eoik4l0I/AAAAAAAAEfM/1MvLpikhzZA5Nvxr4UwI0aCgsfZbXqQBgCLcBGAs/s640/gold%2Btrade%2B1.png" width="640" /></a></div>
<br />
<b>TRADE MANAGEMENT.</b><br />
<b><br /></b>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-XyH2ww48_Bw/Wr6ErsIZT8I/AAAAAAAAEfU/Mb3w0uFkBoEg7cet6s0qXhmaN4oV-lVZQCLcBGAs/s1600/gold%2Btrade%2B2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="484" data-original-width="796" height="388" src="https://4.bp.blogspot.com/-XyH2ww48_Bw/Wr6ErsIZT8I/AAAAAAAAEfU/Mb3w0uFkBoEg7cet6s0qXhmaN4oV-lVZQCLcBGAs/s640/gold%2Btrade%2B2.png" width="640" /></a></div>
<br />
<b>EXIT.</b><br />
<b><br /></b>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-6Iiip6_DAWc/Wr6F89EnhPI/AAAAAAAAEf0/G8vdoPrBFwoNTb1O6XPLCdfeq6UtkoHswCLcBGAs/s1600/gold%2Btrade%2B3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="474" data-original-width="782" height="386" src="https://1.bp.blogspot.com/-6Iiip6_DAWc/Wr6F89EnhPI/AAAAAAAAEf0/G8vdoPrBFwoNTb1O6XPLCdfeq6UtkoHswCLcBGAs/s640/gold%2Btrade%2B3.png" width="640" /></a></div>
<br />
<b>POST-HOC ANALYSIS.</b><br />
<b><br /></b>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-Q2XCH6tn33g/Wr6EsG_r7rI/AAAAAAAAEfc/ltEDtkltStMsFz7qepMbIl_-DQ_yGCwCgCLcBGAs/s1600/gold%2Btrade%2Bpart%2B4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="465" data-original-width="771" height="384" src="https://2.bp.blogspot.com/-Q2XCH6tn33g/Wr6EsG_r7rI/AAAAAAAAEfc/ltEDtkltStMsFz7qepMbIl_-DQ_yGCwCgCLcBGAs/s640/gold%2Btrade%2Bpart%2B4.png" width="640" /></a></div>
<br />
Ouch.<br />
<br />
I loved those gold coins. They were like family to me. My little shiny metal children.<br />
<br />
<div>
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. <a href="http://insider.foxnews.com/sites/insider.foxnews.com/files/styles/780/public/krugman_0.jpg?itok=pcLxUmOA">Only idiots do that.</a></div>
<br />
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.<br />
<br />
2009 Peter was going to a new Peter, a better one. He was going to be...<br />
<br />
<i>a Value Investor</i><span style="background-color: white; color: #222222; font-family: "roboto" , "arial" , sans-serif; font-size: 16px;"><i>™</i></span><i>...</i><br />
<br /></div>
</div>
<div>
<br /></div>
</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com24tag:blogger.com,1999:blog-8367859501985515786.post-86873725910850185252017-03-14T14:05:00.000-04:002017-03-14T14:09:39.348-04:00The Trade That Made No Sense<div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://i.imgur.com/KkPMrtC.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="261" src="https://i.imgur.com/KkPMrtC.png" width="400" /></a></div>
<br /></div>
<div>
<br /></div>
<div>
We were were in agreement that we had to find a better way.</div>
<div>
<br /></div>
<div>
Clockwork and I started our trading careers as <b>professional</b> <b>minimum wage traders.</b> 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.</div>
<div>
<br /></div>
<div>
Every day, we would trade with the same bullshit trading piker mindset.</div>
<div>
<br /></div>
<div>
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. </div>
<div>
<br /></div>
<div>
Yeah 10 cents. Why so little?<br />
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
<i>"Welp, looks like they're gonna run the stops again."</i></div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-CXbAciBe_k8/WKineSby-0I/AAAAAAAACNs/8tIG0tyop0UwVnK6FcPXZpDyfIS0YN-CACLcB/s1600/shouldve%2Bsold%2Bit.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://4.bp.blogspot.com/-CXbAciBe_k8/WKineSby-0I/AAAAAAAACNs/8tIG0tyop0UwVnK6FcPXZpDyfIS0YN-CACLcB/s320/shouldve%2Bsold%2Bit.png" width="198" /></a></div>
<div>
<br /></div>
<div>
<div>
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.</div>
<div>
<br /></div>
<div>
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).</div>
<div>
<br /></div>
<div>
<i>"Let's trade bigger and if we blow up, we blow up. Who cares at this point?"</i><br />
<i><br /></i>
We had a clock in our heads at this point--now or never to make this trading pipe dream a reality.</div>
<div>
<br /></div>
<div>
But we agreed the solution wouldn't be to increase size with our current piker bullshit trading strategies.</div>
<div>
<br /></div>
<div>
We needed to find scale-able strategies where we could hold positions with both size and conviction.</div>
<div>
<br /></div>
<div>
The type of strategy that would make us real money, the type of money that attracted us to trading in the first place.</div>
</div>
<br />
<div>
First, we needed better...</div>
<div>
<br /></div>
<div>
<h3>
<b>...Role Models.</b></h3>
</div>
<div>
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. </div>
<div>
<br />
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.</div>
<div>
<br /></div>
<div>
<div>
Secret sauce trading strategies that included:</div>
<div>
<ul>
<li>Buying thinly-traded ETN/ETF when they were mispriced from their NAV on price spikes</li>
<li>Preferred stock and warrant arbitrage</li>
<li>Trading the opening and closing imbalances</li>
<li>Having huge in positions in stocks I've never heard of, stocks that barely traded 10k shares a day</li>
<li>Exploiting an odd-lot algorithm glitch on shares of BRK.A when it was priced in the 100,000s</li>
</ul>
<div>
Slow Trot told us about the day the entire firm bought stocks during the flash crash. Their attitude stuck with me:</div>
</div>
</div>
<div>
<i><br /></i></div>
<div>
<i>"It was someone else's money."</i></div>
<div>
<br /></div>
<div>
<h3>
<b>Copycat Trading</b></h3>
</div>
<div>
We decided to model ourselves after the best traders at the firm. </div>
<div>
<br /></div>
<div>
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).<br />
<br />
I recorded their best and biggest trades on a daily basis, to see if there was something I could learn from the pro's.<br />
<br />
One particular ticker caught my eye: <b>AEPI</b></div>
<div>
<br /></div>
<div>
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.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-IE4H2-R08ZM/WLM0jl2P2gI/AAAAAAAACQk/VWyVkBC-8zYHZJ_XymEAMIocgN1UgSS2wCLcB/s1600/AEPI%2B9-10%2Bhow%2Bdoes%2Bthis%2Bkeep%2Bhappening.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://2.bp.blogspot.com/-IE4H2-R08ZM/WLM0jl2P2gI/AAAAAAAACQk/VWyVkBC-8zYHZJ_XymEAMIocgN1UgSS2wCLcB/s400/AEPI%2B9-10%2Bhow%2Bdoes%2Bthis%2Bkeep%2Bhappening.png" width="375" /></a></div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
<div>
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. </div>
<div>
<br /></div>
<div>
The AEPI trade was more a weird phenomenon or glitch that kept repeating, over and over and over again.<br />
<br />
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.</div>
<div>
<br /></div>
<div>
And traders were making money <b>hand over fist</b> 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.</div>
<div>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://media.giphy.com/media/MYCgTsBUkcIKc/giphy.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://media.giphy.com/media/MYCgTsBUkcIKc/giphy.gif" width="378" /></a></div>
<br /></div>
<div>
<br /></div>
<div>
There was no explanation from anyone as to why it would work.<br />
<br />
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.</div>
</div>
<div>
<br /></div>
<div>
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.<br />
<br /></div>
<div>
<h3>
<b>The Next Day</b></h3>
</div>
<div>
Do I even have to tell you what we did next? There was only one logical course of action.</div>
<div>
<br /></div>
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<a href="https://4.bp.blogspot.com/-2PG_aV1Lrus/WKjNwJv1DCI/AAAAAAAACOM/vSxnyx68OAkKPlx7leUIoq1Nk1DE8_D8QCLcB/s1600/short%2BAEPI.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="255" src="https://4.bp.blogspot.com/-2PG_aV1Lrus/WKjNwJv1DCI/AAAAAAAACOM/vSxnyx68OAkKPlx7leUIoq1Nk1DE8_D8QCLcB/s400/short%2BAEPI.jpg" width="400" /></a></div>
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<br /></div>
<div>
We saw Slow Trot get into the trade a few minutes before the close. We jammed into it as well.<br />
<br />
Then we waited, in great anticipation.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://i.imgur.com/4o2QDp8.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="260" src="https://i.imgur.com/4o2QDp8.png" width="400" /></a></div>
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<br /></div>
<div>
Funny thing happened: the stock upticked.<br />
<br />
<a href="https://1.bp.blogspot.com/-NEg-6-mmdgQ/WLM1P-9VGLI/AAAAAAAACQs/8fUPOSei3QAVe5odp9XxJmSu_ZBHQoFagCLcB/s1600/AEPI%2B9-13.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" height="400" src="https://1.bp.blogspot.com/-NEg-6-mmdgQ/WLM1P-9VGLI/AAAAAAAACQs/8fUPOSei3QAVe5odp9XxJmSu_ZBHQoFagCLcB/s400/AEPI%2B9-13.png" width="396" /></a></div>
<div>
<br /></div>
<div>
Our positions were immediately out of the money.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-EpKypb4BWSg/WLH1gR_UcpI/AAAAAAAACO4/ToL7XPbjSvcQLqj2JnyhW27SapJ7LHhOQCLcB/s1600/aepi%2Bpnl.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="175" src="https://2.bp.blogspot.com/-EpKypb4BWSg/WLH1gR_UcpI/AAAAAAAACO4/ToL7XPbjSvcQLqj2JnyhW27SapJ7LHhOQCLcB/s320/aepi%2Bpnl.png" width="320" /></a></div>
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<a href="http://i.imgur.com/hw9Ejng.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="261" src="https://i.imgur.com/hw9Ejng.png" width="400" /></a></div>
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<br /></div>
<div>
Faced with paying up a big one point spread to take a loss, we chose to keep holding.<br />
<br />
Then we saw the "pro traders" add to their positions so again, we just followed along and did what they did.<br />
<br />
This was definitely going to end well.<br />
<h3>
<br /><b>The Day After That</b></h3>
<div>
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?</div>
<div>
<br /></div>
<div>
At the open, our hopes were dashed. AEPI refused to slow down.</div>
<div>
<br /></div>
<div>
Our max-loss limits were triggered on the open and the firm liquidated our positions.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
They say the best trades have 3 phases:<br />
Innovators.<br />
Imitators.<br />
...and Idiots.<br />
<br />
And once the idiots hop on the bandwagon, the trade gets over-crowded and stops working.<br />
<br />
Even though I don't know why the trade ever <b>started </b>working in the first place, I at least know why it <b>stopped </b>working.<br />
<br /></div>
<h3>
<b>Aftermath</b></h3>
</div>
<div>
<div>
To this day, I still have no idea what was going on in AEPI. I have many questions.</div>
<div>
<br /></div>
<div>
1) How did someone find out about it?</div>
<div>
2) Why did this trade have an edge?</div>
<div>
3) Why did it stop working?</div>
<div>
4) Was this a case of a trader knowing something but not wanting to spell it out for legality reasons?</div>
<div>
5) How was everyone else so willing to hop onto a trade that seemingly had no clear logical explanation for why it worked?</div>
<br />
<div>
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.</div>
</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com11tag:blogger.com,1999:blog-8367859501985515786.post-80877239862269210202017-02-12T15:00:00.000-05:002017-02-18T17:29:33.761-05:00Stepper!<div>
<h3>
<b>The Firm Next Door</b></h3>
</div>
<div>
<br />
There was another prop firm sharing the building floor with us. Let's call them <b>Lemmings Capital.</b></div>
<div>
<br /></div>
<div>
Lemmings Capital was a small outfit run by a rotund bear-bodied Russian, <b>Ivan,</b> and <b>Bob,</b> a balding, bespectacled man who always sported an worn-out adjustable cap. Supposedly, they were both "traders back in the day" i.e. the <a href="http://www.investopedia.com/terms/s/soesbandits.asp" target="_blank">SOES bandits era</a>. 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,<br />
<i><br /></i>
<i>"I don't know how those two sleep at night." </i></div>
<div>
<br /></div>
<div>
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. </div>
<div>
<br /></div>
<div>
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, <b>Billy,</b> 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?</div>
<div>
<br /></div>
<div>
"Well, we look for steppers."</div>
<div>
<br /></div>
<div>
"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. </div>
<div>
<br /></div>
<div>
It was an "advanced level II strategy", he told me. He proceeded to explain further.</div>
<div>
<br /></div>
<div>
<h3>
<b>"Stepper!"</b></h3>
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<a href="https://3.bp.blogspot.com/-B25RP4X_244/WKC4OEXSisI/AAAAAAAACMo/Q3oo5DkiYg4Wn50S6EyVmg5_Jp7ERK3WQCLcB/s1600/stepper%2Bin%2Baapl.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://3.bp.blogspot.com/-B25RP4X_244/WKC4OEXSisI/AAAAAAAACMo/Q3oo5DkiYg4Wn50S6EyVmg5_Jp7ERK3WQCLcB/s320/stepper%2Bin%2Baapl.jpg" width="320" /></a></div>
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<div>
<b><br /></b></div>
<div>
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.<br />
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<a href="https://3.bp.blogspot.com/-3Kez-YBaOgA/WKCyDoLJgiI/AAAAAAAACLo/IJFLzlqf5ykg-Ti-lHg15iALv9tzA49pgCLcB/s1600/BUY%2BME%2BLVL%2B2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="371" src="https://3.bp.blogspot.com/-3Kez-YBaOgA/WKCyDoLJgiI/AAAAAAAACLo/IJFLzlqf5ykg-Ti-lHg15iALv9tzA49pgCLcB/s400/BUY%2BME%2BLVL%2B2.png" width="400" /></a></div>
<br />
<br />
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.</div>
<div>
<br /></div>
<div>
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.<br />
<br />
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<a href="https://2.bp.blogspot.com/-0Vs9F5h6xRU/WKCzXq_q6vI/AAAAAAAACL4/seOmKAPGTAsmH1QS7p7YCnH1HUo_7BjZgCLcB/s1600/buy%2Bbuy%2Bbuy.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="408" src="https://2.bp.blogspot.com/-0Vs9F5h6xRU/WKCzXq_q6vI/AAAAAAAACL4/seOmKAPGTAsmH1QS7p7YCnH1HUo_7BjZgCLcB/s640/buy%2Bbuy%2Bbuy.png" width="640" /></a></div>
<br /></div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
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.</div>
<div>
<br /></div>
<div>
That other 1 out of 10 times... well, you got fucked.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-A3y9elP2pT0/WKCzow8aR3I/AAAAAAAACMA/9Vz4kJ-Tt9ArSOFXsYFMv18qsLfs-Ck1ACLcB/s1600/1%2Bprinted.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="344" src="https://2.bp.blogspot.com/-A3y9elP2pT0/WKCzow8aR3I/AAAAAAAACMA/9Vz4kJ-Tt9ArSOFXsYFMv18qsLfs-Ck1ACLcB/s640/1%2Bprinted.png" width="640" /></a></div>
<br />
<br />
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 <b>"one-printing"</b>. 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 href="http://www.investopedia.com/terms/s/slippage.asp" target="_blank">a few more ticks</a> 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.</div>
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<br /></div>
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<a href="https://3.bp.blogspot.com/-Jui-FausFV4/WKiUx4ug7QI/AAAAAAAACNM/_2HMnl9GAw8rj_pkCGe1xtq60O0sbiE2QCLcB/s1600/prop%2Bdesk%2Blost%2Bmoney.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="430" src="https://3.bp.blogspot.com/-Jui-FausFV4/WKiUx4ug7QI/AAAAAAAACNM/_2HMnl9GAw8rj_pkCGe1xtq60O0sbiE2QCLcB/s640/prop%2Bdesk%2Blost%2Bmoney.png" width="640" /></a></div>
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</div>
<div>
A few minutes later, the stock would trade right back up to the original price where they had gotten in.<br />
<br />
Agony. </div>
<div>
<br /></div>
<div>
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.</div>
<br />
<div>
Slowly but surely, every trader blew up their accounts, one algo-driven shakedown at a time.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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<a href="https://3.bp.blogspot.com/-S2sTNW_XAik/WKCwTpHV7pI/AAAAAAAACLg/-KKw415nj0wRV5NkofpUr0VBYYLCqvVkgCEw/s1600/angry%2Bprop%2Bdesk.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://3.bp.blogspot.com/-S2sTNW_XAik/WKCwTpHV7pI/AAAAAAAACLg/-KKw415nj0wRV5NkofpUr0VBYYLCqvVkgCEw/s320/angry%2Bprop%2Bdesk.jpg" width="320" /></a></div>
<br /></div>
<div>
<br /></div>
<div>
<i>"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."</i></div>
<div>
<br /></div>
<div>
Translation: <b>Make another deposit with us.</b><br />
<b><br /></b></div>
<div>
</div>
<div>
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.</div>
<div>
<br /></div>
<div>
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?</div>
<div>
<br /></div>
<div>
"No, but I feel I'm close. It takes at least year to be profitable they said."</div>
<div>
<br /></div>
<div>
I think he left a month later to take the CFA or something like that.</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com6tag:blogger.com,1999:blog-8367859501985515786.post-86126713128838709432016-11-10T08:10:00.000-05:002016-11-10T08:10:02.298-05:00Podcasthttps://chatwithtraders.com/ep-098-peter-to/<br />
<br />
I recorded a podcast. It's about trading and stuff. Thanks to Aaron for reaching out!Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com89tag:blogger.com,1999:blog-8367859501985515786.post-84430222221121428902016-11-04T16:16:00.004-04:002018-08-25T13:38:18.706-04:00The Best Trade I Made in October<div style="font-family: Tahoma; text-align: -webkit-auto;">
... was trading DeAndre Hopkins and Jeremy Hill for Dez Bryant in my $200 fantasy football league last week.</div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
It was that kind of a trading month. </div>
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<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
9 months of hugging the highs of my equity curve and then the first prolonged dip.</div>
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<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
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. </div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
1% drawdown? I need to take a day off, I can't handle it anymore.</div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
3% drawdown? I want to quit trading forever.</div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
5% drawdown?! Where's the cliff because I gotta jump off!</div>
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<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
This is kind of how my equity curve and my day-to-day mood plays out.<br />
<br /></div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-ajTvpb7xXDQ/WBziYRwD1EI/AAAAAAAABmw/JlH3zk2-_4Y2i7Gucbq6hl7U5ZkeudROwCLcB/s1600/equity%2Bcurve.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="222" src="https://3.bp.blogspot.com/-ajTvpb7xXDQ/WBziYRwD1EI/AAAAAAAABmw/JlH3zk2-_4Y2i7Gucbq6hl7U5ZkeudROwCLcB/s400/equity%2Bcurve.png" width="500" /></a></div>
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<div style="font-family: Tahoma; text-align: -webkit-auto;">
<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
So I'm kinda there right now.</div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
<br /></div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
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 <a href="https://streamable.com/6wjf">Joakim Noah jumpshot</a> (if you can call it that) loop over and over again. </div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
<br /></div>
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Then I waste the rest of my day staring at my fantasy football team's roster to see how I can make it better.<br />
<br />
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.</div>
<div style="font-family: Tahoma; text-align: -webkit-auto;">
<div style="font-family: tahoma;">
<strong><br /></strong>
<br />
<h3>
<strong>
Long DEZ, Short NUK</strong></h3>
</div>
<div style="font-family: tahoma;">
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.<br />
<br />
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 <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj2gc-O0Y_QAhXn7IMKHfZ5CBEQFggdMAA&url=http%3A%2F%2Fwww.footballoutsiders.com%2Fdvoa-ratings%2F2016%2Fweek-8-dvoa-ratings&usg=AFQjCNGKR7nN_XZ33iuAWFCokvolQZnWSQ&sig2=CvJgQvPuZxPfHCWXcaMFfQ" target="_blank">offensive DVOA</a>. 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 <a href="https://www.youtube.com/watch?v=VS93mTTKSvM" target="_blank">this stud</a> on your team? Certainly, <i>someone </i>was to blame... </div>
<div style="font-family: tahoma;">
<span style="font-size: xx-small;">*it's pronounced Nuke</span><br />
<br /></div>
<div style="font-family: tahoma;">
... I'll tell you: it's this guy.</div>
<blockquote class="twitter-video" data-lang="en" style="font-family: tahoma;">
<div dir="ltr" lang="en">
Never has one "throw" so embodied a quarterback's entire career work <a href="https://t.co/kWJFc5rFRz">pic.twitter.com/kWJFc5rFRz</a></div>
— Laurie Horesh (@LaurieHoresh) <a href="https://twitter.com/LaurieHoresh/status/790748556244103168">October 25, 2016</a></blockquote>
<div style="font-family: tahoma;">
<script async="" charset="utf-8" src="//platform.twitter.com/widgets.js"></script>
</div>
<div style="font-family: tahoma;">
<br /></div>
<div style="font-family: tahoma;">
Meet <b>Brock Osweiler</b>. The <a href="http://ftw.usatoday.com/2016/10/nfl-10-worst-disappointing-free-agent-signings-2016-brock-osweiler" target="_blank">$72 million dollar man</a>. Historically bad in an <a href="http://www.espn.com/nfl/story/_/page/HotReadx161103/decline-nfl-quarterback-play-myth-bill-barnwell-2016" target="_blank">era where quarterbacks are as statistically prolific as ever</a>. </div>
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<br /></div>
<div style="font-family: tahoma;">
Can't throw accurately <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
<div style="font-family: tahoma;">
<a href="http://www.espn.com/blog/houston-texans/post/_/id/17586/brock-osweiler-deandre-hopkins-continue-to-struggle-with-chemistry" target="_blank">Can't get the ball to his playmakers</a> <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
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Can't read the defense <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
<div style="font-family: tahoma;">
<a href="https://www.profootballfocus.com/pro-texans-have-reason-to-be-worried-about-brock-osweiler/" target="_blank">Can't handle pressure</a> <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
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Turnover prone <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
<div style="font-family: tahoma;">
<a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjSl53H0o_QAhWk1IMKHb_1A_IQFggdMAA&url=http%3A%2F%2Fabcnews.go.com%2FSports%2Fbrock-osweilers-lack-confidence-affecting-play-sources%2Fstory%3Fid%3D43171305&usg=AFQjCNG7uKbhaJ6ovc0EOMbJAUyvGoe_NA&sig2=yu-zDlhEuZtNygVEXautjg" target="_blank">Low confidence</a> <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
<div style="font-family: tahoma;">
Actually somehow worse than perennial backup fodder such as <a href="http://i.imgur.com/lg1IQe0.png" target="_blank">Ryan Mallett, Brian Hoyer, TJ Yates and Brandon Weeden</a> <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span><br />
Makes me want to throw up when I watch him play <span style="background-color: white; color: #545454; font-family: "arial" , sans-serif; font-size: x-small; line-height: 18.2px;">✔</span></div>
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<br /></div>
<div style="font-family: tahoma;">
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. <a href="http://www.pro-football-reference.com/players/M/MossRa00.htm" target="_blank">2006 Randy Moss.</a> <a href="http://www.pro-football-reference.com/players/F/FitzLa00/gamelog/2012/" target="_blank">2012 Larry Fitzgerald.</a> 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.</div>
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<br /></div>
<div style="font-family: tahoma;">
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.</div>
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<br /></div>
<div style="font-family: tahoma;">
For those unfamiliar with fantasy football, <strong>most leagues don't trade.</strong> A couple theories on why trades seldom close:</div>
<ul style="font-family: tahoma;">
<li>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.</li>
<li>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.</li>
</ul>
<div>
<br /></div>
<div style="font-family: tahoma;">
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.</div>
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<br /></div>
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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. <a href="http://www.pro-football-reference.com/players/B/BryaDe01/gamelog/2014/" target="_blank">2014 Dez</a> 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.</div>
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<br /></div>
<div style="font-family: tahoma;">
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.</div>
<div style="font-family: tahoma;">
<br /></div>
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I pulled the trigger. He quickly accepted. </div>
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<h3>
<strong>The Commissioner Speaks</strong></h3>
</div>
<div style="font-family: tahoma;">
Shortly after the trade completed, my pal relayed to me some group texts from the league commissioner. He was lobbying everyone in the league<b> </b>to veto the trade because it was (in his opinion) "unfair". I was shocked.</div>
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<br /></div>
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<strong>WHAT???? </strong></div>
<div style="font-family: tahoma;">
<strong><br /></strong></div>
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"How in the hell could this be unfair?" I thought. </div>
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<div style="font-family: tahoma;">
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.</div>
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<br /></div>
<div style="font-family: tahoma;">
Then I re-read the text.</div>
<div style="font-family: tahoma;">
<br /></div>
<div style="font-family: tahoma;">
<span style="font-family: "courier new" , "courier" , monospace;">Commissioner: Hopkins is a star receiver and Jeremy Hill just had a huge game. </span><span style="font-family: "courier new" , "courier" , monospace;">Nima's team* could be stacked in the playoffs now. </span><span style="font-family: "courier new" , "courier" , monospace;">Not fair to the rest of us. This should be vetoed.</span><br />
<span style="font-family: inherit; font-size: xx-small;">*other guy in the trade</span></div>
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<b>Oh.</b></div>
<div style="font-family: tahoma;">
<br /></div>
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He's saying <b><u>I</u></b> got ripped off.</div>
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<br /></div>
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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.</div>
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He's saying that I'm a moron, basically. That's what he's saying.</div>
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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!<br />
<br />
They managed to get their four veto's and the trade was reversed.</div>
<div style="font-family: tahoma;">
<br /></div>
<div style="font-family: tahoma;">
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?</div>
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<br /></div>
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<b>No, fuck that. </b>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. </div>
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<br /></div>
<div style="font-family: tahoma;">
The commissioner's impassioned lobbying against the trade also inflamed my sense of right and wrong.<br />
<br />
Who the fuck was he to think his perception of player value was superior to all others?<br />
Who the fuck was he to think he can dictate what is fair among two competitive parties mutually agreeing to a transaction?<br />
Who the fuck is he to think he should "protect" other members from their own choices?<br />
<br />
Veto's should be used against clear collusion, and only that. To veto this trade was anti-capitalist and thus<b> </b>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!</div>
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<br /></div>
<div style="font-family: tahoma;">
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.</div>
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<h3>
<b>Sunday Morning</b></h3>
Sunday came around. I was matched against the league's first place team.<br />
<br />
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...<br />
<br />
6.4 points. Less than half his weekly projection.<br />
<br />
Nuk, I love ya baby, but we couldn't keep going--not like this. It's not you, it's your quarterback.<br />
<br />
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.<br />
<br />
<b>The Moment of Truth</b><br />
With three minutes left in the game, I needed a touchdown to win.<br />
<br />
I needed the Cowboys to drive down the field and throw it to the right guy.<br />
<blockquote class="twitter-video" data-lang="en">
<div dir="ltr" lang="en">
WOW! <a href="https://twitter.com/dak">@dak</a> ➡️ <a href="https://twitter.com/DezBryant">@DezBryant</a> = Touchdown <a href="https://twitter.com/dallascowboys">@dallascowboys</a>! <a href="https://twitter.com/hashtag/PHIvsDAL?src=hash">#PHIvsDAL</a> <a href="https://twitter.com/hashtag/DallasCowboys?src=hash">#DallasCowboys</a> <a href="https://t.co/ixOZ0D1MmP">pic.twitter.com/ixOZ0D1MmP</a></div>
— NFL Deutschland (@NFLDeutschland) <a href="https://twitter.com/NFLDeutschland/status/793027815042064384">October 31, 2016</a></blockquote>
<script async="" charset="utf-8" src="//platform.twitter.com/widgets.js"></script>
<br />
19.3 points. Vindication baby. <b><span style="font-size: large;">Vindication.</span></b><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><img alt="" src="https://media3.giphy.com/media/F96MoqCdrSfok/200w.gif#15" style="margin-left: auto; margin-right: auto;" title="" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;">me in the living room</td></tr>
</tbody></table>
<b><br /></b></div>
<div style="font-family: tahoma;">
<span style="font-family: "tahoma";">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 <strike>unnecessary</strike> completely necessary, maybe-borderline-harassment, nasty taunting messages attached. Fuck him, that's why.</span><br />
<div style="font-family: tahoma;">
<br /></div>
</div>
<div style="font-family: tahoma;">
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. </div>
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<span style="font-size: xx-small;"><br /></span></div>
<div style="font-family: tahoma;">
<span style="font-size: xx-small;">Fuck you Navid. I've never met you but I think you're an asshole. Let teams make their own choices. <a href="http://i.imgur.com/vugFSG0.png" target="_blank">SUCK ON THIS</a></span></div>
</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com8tag:blogger.com,1999:blog-8367859501985515786.post-57566786479640577012016-09-10T15:29:00.003-04:002016-09-10T16:27:02.292-04:00Reflections<div>
It's been a year since my last blog post.</div>
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<br /></div>
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This is the cycle I've been going through:</div>
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<br /></div>
<div>
"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</div>
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<br /></div>
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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</div>
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<div>
Random points and events made in bullet form, in no relevant order:</div>
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<div>
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. </div>
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<br /></div>
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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.</div>
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<br /></div>
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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.</div>
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4) December 2015 -- I opened my mailbox and saw a letter from the IRS. This can't be good.</div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-kbq16SOxS2Q/V9RRLTXetAI/AAAAAAAABTY/gxprmrR_MVs0Igm2jhrwpk_G_ICsBb5aQCLcB/s1600/letter.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="277" src="https://2.bp.blogspot.com/-kbq16SOxS2Q/V9RRLTXetAI/AAAAAAAABTY/gxprmrR_MVs0Igm2jhrwpk_G_ICsBb5aQCLcB/s400/letter.png" width="400" /></a></div>
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Long story short, this was all because of postage error I made when sending my extension request in April.<br />
<br />
Well shit, now I have to trade...</div>
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<br /></div>
<div>
5) At the start of the year, I traded like a massive piker. My goal was simply to show up--and showing up means <b>DON'T LOSE MONEY</b>, because if you lose money--you stupid fucking idiot--you're gonna feel bad and you hate feeling bad so you stop showing up!</div>
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Just show up, don't lose, and at the end of the day, you'll be surprised...</div>
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<div>
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 <b>what not to do.</b> 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.</div>
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<br /></div>
<div>
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.</div>
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<br /></div>
<div>
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.</div>
<ul>
<li>I started a corporate entity for tax purposes</li>
<li>I opened an IRA for longer-term investing</li>
<li>I bought a quality desktop computer (I had been trading off a laptop for the past 2 years)</li>
<li>I subscribed to a news feed (Benzinga)</li>
<li>I paid for a real-time stock filter (Trade Ideas)</li>
<li>I started renting a WeWork office</li>
<li>I got a corporate charge card to use for the above expenses and collect those sweet, sweet rewards points</li>
</ul>
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<br /></div>
<div>
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?<br />
<br />
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.</div>
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<br /></div>
<div>
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.</div>
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<div>
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.</div>
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<br /></div>
<div>
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?</div>
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<br /></div>
<div>
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.</div>
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<br /></div>
<div>
Peter To.</div>
<div>
Living in the financial capital of the world.</div>
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Young gun in his 20s. Real hot shot. </div>
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Hedge fund manager.</div>
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Nice tailored suits.</div>
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Runs 10 miles every day.</div>
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Works 80 hours a week.</div>
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Millionaire.</div>
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No, fuck that shit... billionaire!</div>
<div>
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)</div>
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<br /></div>
<div>
All these grandiose visions. I thought I was better than everyone else around me because I had <b>fire </b>and <b>ambition</b>. Nobody would outwork me!</div>
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<br /></div>
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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.</div>
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<br /></div>
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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.</div>
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<br /></div>
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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.</div>
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<br /></div>
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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!</div>
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<br /></div>
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16) Ah fuck, stop it already.</div>
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<br /></div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com13tag:blogger.com,1999:blog-8367859501985515786.post-56163327965824325852015-08-30T23:36:00.001-04:002015-08-30T23:36:32.268-04:00Weekend Ramblings: Confidence, Mispricings, and Trying Too Hard<div style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">
I need to to free-write. Write without worrying about creating a narrative, drawing, editing, or simplifying in-the-know concepts to outsiders. I need to let myself spew words and create a habit of updating this blog, otherwise I'll go on radio silence for another half-year. Maybe this becomes a weekly thing.</div>
<div style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">
<b><br /></b></div>
<div style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">
<b>The Value of Confidence</b></div>
<span style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">One intangible value to being at a (good) prop firm is being able to tailgate on the confidence of other skilled traders. On the surface, this goes against the conventional wisdom in trading that you can't blindly follow the trades of another pro trader or guru, but it's a gray area. I think 2 things need to be true before one can benefit from the conviction of others.</span><br />
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<br /></div>
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1) You're already a consistently profitable trader</div>
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2) You believe in the trade idea and intuitively/intellectually understand the edge (ask yourself: would you make the trade yourself if you were trading all alone?)<br />
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And perhaps the only shortcoming is a lack of real-time situational experience. Corrections greater than 5% don't happen all too often. There's a very tight window to put on the risk, you can't just sit there doing mental calculations and then all of a sudden you reach the tipping point for your decision. <i>Okay, now I will finally decide exactly what to do and how to do it.</i> It doesn't work like that.</div>
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A few of my friends (with 4-5 years of trading experience, like myself) who had their career days had never aggressively traded a steep market pullback (or "crash", however you want to define it). But they were able to follow the lead of some of the older guys of 10+ years of experience, several of whom had traded the flash crash. Seeing those guys execute in real-time can take the pressure off. There's also other trades to express the same big picture trade, like buying the most beaten down NYSE large caps on the open (CVS in the low 80's??? low hanging fruit there). I think it's more psychologically daunting to try to take on the "bounce trade" by only trying to time the big ETF's like buying 20k SPY and shorting 50k VXX--at least it would be for me.</div>
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I gotta say, as much as I pride myself in being an independent thinker who hates getting into risk just because everyone else is doing it, I really could have used that spark on Monday. That sense of that there was unusual opportunity for the day and it was time to lay out serious rope.</div>
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On the flip side, there are drawbacks... like group think and highly correlated/concentrated risk. It's not all happy endings.</div>
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<b>Mispricings</b></div>
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<i>I think the stock is mispriced so I bought it.</i></div>
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"Mispriced" -- I love hearing that word. To me, it makes you sound like you know what you're doing. Replace that word with other words in the trading lexicon or just think of the many common reasons people buy stocks.</div>
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<i>I think the stock is oversold so I bought it.</i></div>
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<i>I think the stock is undervalued so I bought it.</i></div>
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<i>I think the stock had good news so I bought it.</i></div>
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<i>I think the stock is a good company so I bought it.</i></div>
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<i>I think the stock is technically strong so I bought it.</i></div>
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<i>I think the stock is poised for a breakout so I bought it.</i></div>
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Now, I'm not saying I make snap judgments off people who tweet stuff like that but there's good chance they're just some dilettante trading off what they hear on CNBC's Fast Money.</div>
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After listening to stories from a dozen veteran prop/institutional guys about all the strange, esoteric ways* they've made money, I always interpret mispriced as "something I don't know" or "the market is very, obviously wrong here." </div>
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<span style="font-size: xx-small;">*like, really weird shit. shit nobody ever touches, BRK.A shares or thinly traded warrants/preferred stock</span></div>
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What does it mean to buy a stock that's down a lot and you sense that it shouldn't be? Is it catching a fall knife or buying a mispriced stock? The only honest answer is "it depends". I think a key component is why the stock is down and how quickly the market can correct itself. Here are 2 different situations--just a thought exercise.</div>
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A) <b>ABCD</b> is former high flying tech stock. The sector has fallen out of favor. The stock is down 50% from 6-month highs and closing red for the fifth day in a row. </div>
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B) <b>WXYZ</b> is a large cap down 9% intraday and trading well below the 6-month trading range. It is one of a handful of stocks, all uncorrelated in sector/industry, trading erratically for the day, with wide spreads and peculiar price jumps that have no rhyme or reason to them. There is no news on the stock and the broad market indices are near unchanged. </div>
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Situation A is likely a momentum situation--one side is getting beaten and their pain drives the stock lower. It can keep going. We see that all the time; it's too common to be an anomaly. The second situation... <a href="http://www.zerohedge.com/news/what-happens-when-hft-algo-goes-totally-berserk-and-serves-knight-capital-bill">could be different</a>. Nobody is going to write a book or record a DVD about it.<br />
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Just something to think about.</div>
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<b>Trying Too Hard</b></div>
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I tried way too hard this week. I traded 4-5x the volume this week that I had the previous 2 weeks. I pressed it.</div>
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End result: I made less money (roughly the same ballpark, but less when counting to the penny). Figures.</div>
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It takes a toll mentally too. I spend every the next 2 hours after the close in zombie mode, just sitting on my computer chair doing nothing.<br />
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Motivation can come from the wrong place. I think that's exactly what's happening to me right now. </div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com8tag:blogger.com,1999:blog-8367859501985515786.post-3454235568183492912015-08-24T21:25:00.001-04:002015-08-25T08:58:42.147-04:00Two Mornings in August<div>
<b>I have to write about today... have to get something off my chest.</b></div>
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<b>August 8th, 2011</b></h2>
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I remember the first month of live trading at my prop firm. We (myself plus 11 others) were all trainees pikering around with a few hundred shares, risking no more than $150 for the entire day. We spent our morning prep sessions going over stocks gapping up/down on news. Nobody really considered trading market indices like SPY, QQQ, VXX, or anything like that.<br />
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The market, two and a half years removed from the dead lows of early 2009, had spent most of the summer in a frustrating, non-volatile grind for most of the summer. Traders were laboring for 10-cent scalps just to put food on the table and pay the rent. Some of the older guys were talking about leaving for another job or for grad school. </div>
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Then shit hit the fan. There was <a href="https://en.wikipedia.org/wiki/European_debt_crisis">some bullshit happening in Europe</a>. America had a <a href="https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2011">debt ceiling crisis</a>. Momentum came back into the market and fun times were upon us.</div>
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I remember one of my managers buying the SPY's for a bounce and <i>erupting </i>with this weird, almost-like-a-tantrum, super-intense call-out to the market.</div>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;">for the next 6 months, anytime anyone bought anything, they would shout out "BE REAL!!!"</span></td></tr>
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I also remember another fellow trainee who would keep calling out useless alerts while the market got taken to the slaughterhouse. </div>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;">everyone's looking at SPY already... what's the point?!</span></td></tr>
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You know that guy in your local trading chatroom that has nothing useful to provide beyond ticker spam like "ABC hod" or "XYZ lod"--as if there's ever any actionable information to be made from observing new highs and lows? Yeah, this was him. </div>
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Let's call him <b>Clockwork</b>, for reasons that will become more apparent later*.</div>
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<span style="font-size: xx-small;">*he's also an avid DotA player and I think he'd like that</span></div>
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It turns out Clockwork was the only trainee trading the SPY. He made $600 trading the SPY on a 200 share maximum his first day, which impressed everyone other than me because 1) I thought I was the shit and 2) I thought trading the market had no real edge otherwise we'd all be futures traders making bajillions pushing around the E-Mini's. </div>
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When we were moved from the trainee section to be re-seated with the junior/senior traders, Clockwork was assigned to sit to my direct left. </div>
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He asked a lot of annoying questions. </div>
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He copied nearly everything I did and then just did it faster.</div>
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He had the most irritating trading style if you were in the same play. Tell him about a stock and he would just jump into it without thought, sell 100% into a short-term top then buy it all back on the pullback while you took all the heat on the trade and made less. Sometimes he would accidentally short by trying to sell long and even make money on that too.</div>
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He would take the biggest piker trades (low-margin, commission-heavy trades) and squeeze a dime out of a nickel. Then he'd get others into the same stock (not to front run, but because he didn't know any better) and crowd the trade. When the market makers ran the stops, he'd get out fastest while everyone else usually ate the slippage.</div>
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But Clockwork had consistency down quickly. One reason is because his execution was nearly flawless. Not only was he the fastest in terms of pure reflex, but he didn't seem to suffer from any mental lapses, like from greed (to take a profit) or stubbornness (to take a small loss). He would get out when it was time to get out. It created a habit of steady-hands trading. If anything, his problem was the reluctance to stay in and take (normal, expected) drawdown, even if profit was locked in. He didn't make big money but he closed profitable nearly every day--like clock work.</div>
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<i>"I just try not to lose money</i>." -- that's how Clockwork would explain how he's so consistent. He's said that to me and other traders so many times, he might as well trademark it.</div>
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I sat next to Clockwork for the rest of the time I was at the firm--almost 3 years as a tandem*. We were the only two trainees from that class, out of a dozen, that "made it" as professional traders.</div>
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<span style="font-size: xx-small;"><b>*</b>Clockwork also sat next to me during <a href="http://ptotrading.blogspot.com/2014/11/the-day-i-lost-sht-ton-of-money-part-ii.html">my day of reckoning</a>, getting run over by the same long position on FNMA. He also got stuck but he didn't trade as large as I had. He rallied from down roughly $50,000 to break-even. </span></div>
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<b>August 24th, 2015</b></h2>
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Today, I wake up at 8:45. I check a text message that Clockwork sent me at 7:07.</div>
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<i>"Black Monday!!!!"</i></div>
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I boot up the screens.</div>
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<i>Oh shit, the SPY is down a ton already...</i></div>
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I over-slept my alarm by almost an hour. I didn't bother to prepare over the weekend even though the market just had the first significant trend day in several months. I've been trading with an on/off switch for almost a good half year now. I don't have goals anymore. I don't push or challenge myself to trade bigger or learn new plays. I just try to make something ("something is better than nothing", I sheepishly tell myself) and then leave without stress. That little voice inside whispering "you're wasting your potential"? Eh, I'll just drown him out by watching porn or browsing Reddit.</div>
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I consider myself a novice when it comes to market plays--the type of trading setups, be it indices or a basket of high-beta market stocks, that depend on unusual market conditions. My income is usually from niche areas in the market like trash stocks, growth IPOs, and biotech. Needless to say, I didn't have a lot of confidence in my ability to take money from these big market movements. What was I going to buy? Or would I short VXX? Where would I buy it? What's the most efficient and safe way to scale in? What's my thesis? What's my expectation? I wonder if it could have a huge panic on the open? I wasn't really sure. I barely thought about it. Coffee wasn't hitting the spot yet. I wasn't ready at all. I cut my size down to almost nothing.</div>
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I shorted 200 shares of UVXY around 70, covered somewhere between 5-20 points too early, and made a profit. Nothing crazy--the type of money I make on a daily basis on most profitable trades. Not trying to be a hero or anything, but just finding effortless money and taking what I could get.</div>
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<i>Well... the market bounced 10 points. That doesn't happen every day. I wonder what Clockwork is up to?</i></div>
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I sent him a gchat. We talk almost every trading day.</div>
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I looked at the number--what he just told me he was up in the first 30 minutes of trading was already more than I ever made on my personal best day. I was stunned. I kept staring at it. I didn't know what to think.</div>
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After a short pause to comprehend what just happened, my inner monologue gathered itself to speak. My face started to wince. My toes curled and my hands balled into fists.</div>
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<b><i>IT WAS RIGHT FUCKING THERE YOU IDIOT! A HUGE FUCKING TRADE! YOU CAN GO YEARS WITHOUT THAT TYPE OF PRICE ACTION ON THE SPY. WHAT THE FUCK IS WRONG WITH YOU, THIS IS YOUR JOB!</i></b></div>
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It had hit me: I just blew a monster opportunity.</div>
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This is the type of day to make your entire week/month/year/life*. And I went into it half-assed like any other day. </div>
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<span style="font-size: xx-small;">*if you are a certain type of trader. I am well-aware how easy it is to also lose everything if you don't know what you're doing or if you have overnight portfolio risk or whatever... that perspective doesn't matter to me.</span></div>
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The guilt and regret sank in. Hard.</div>
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<i>Was it worth staying up til' 2am last night?</i></div>
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<i>Was it worth it dicking around on the internet instead of paying attention?</i></div>
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<i>Was it worth it to nap and watch TV all weekend?</i></div>
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<i>All these unproductive lifestyle choices you've made </i><i>the past 6 months</i><i>, was it WORTH IT?</i></div>
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Why did he have to tell me how much everyone made? Doesn't he know it crushes my self-esteem? I never want to look at what other traders make. It bothers me way too much. All you twats on Twitter who respond to PnL screenshots and say it's inspiring... fuck you guys! Do you all piss rainbows and unicorns too? Where do you get your goddamn positive attitude from? I look at that stuff and I just feel small and insecure. I feel so low that I contemplating quitting forever and then maybe live in some cheap asian country. You know that quote about how people hate seeing in others what they don't see in themselves? It's one of those bullshit pictures on Facebook that people post... it's kinda true about me. That's me when I see results I can't reach. I hate myself. I hate how afraid and gutless I am. </div>
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<i>Deep breath</i></div>
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OK, I'm calm now. Needless to say, it was a long 5 minutes inside my brain from 10:05 to 10:10. I was a little upset.</div>
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I grinded the rest of the day to make some money... a sum that would be 2nd best daily PnL for this month but still a paltry sum all things considering. Emotionally, it feels like a loss. Maybe the worst I have felt about trading since <a href="http://ptotrading.blogspot.com/2014/11/the-day-i-lost-sht-ton-of-money-part-ii.html">that day</a><span id="goog_1743281659"></span><span id="goog_1743281660"></span><a href="https://www.blogger.com/"></a>.</div>
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I guess a lot of this seems like petty hindsight and I should be better than that... especially after prefacing it by saying I'm not the best at market plays. But I know I can trade anything. I know panic when I see it. I know what happens after panic. I know that if I focus and that if I prepared myself emotionally to take on risk, I can do so much better. I just need to be involved and then confidence will build afterwards. Force the issue if I have to, which goes against all conventional trading wisdom, but unusual action today warrants exceptions. Get involved, figure it out, you're a big boy with near 6 years of experience and a real bankroll behind you. That's the point. Am I making 1mil or even 100k today, no chance, but I'll surprise myself. I guess the question now is whether I have the character to commit to doing that every day from this point forward. </div>
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But enough about my angst... because the only way I can cope with being such a selfish prick with a fragile ego (believe me, I hate that I have these thoughts too) is to be happy for my friends. After all, they have families to feed and rent to pay--after today, maybe some nice watches and cars to buy too.</div>
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<b>Back to Clockwork. </b></div>
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This was the same guy who sat next to me for 3 years. The same guy who only wanted to scalp 10 cent trades and make $100. Same guy who frontran his stops and never gave any position the correct room because he hated losing money. Same guy who hated giving back profits so he never held winners for long.</div>
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4 years later in the present, he's now a conviction trader buying into the market bottom and taking home an annual salary in a day.</div>
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I feel like the older brother who just got beat by the younger one in a game of pick-up hoops for the first time ever. Taken aback at first but now proud.</div>
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Here's to you, my good friend. Your profits <strike>inspired me</strike> pissed me off to the point where I had to do some much needed reflection. Please tell me next time you're laying out that kind of rope on a trade!</div>
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And to a few of my other good friends who posted career numbers today, if perchance you're reading this, congratulations. Y'all earned it. Remember when none of us made real money and we were all somewhat cynical about a long-term career in trading? Well, shit's real now.</div>
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Now I'm going to run myself (literally, like on a treadmill) into the ground and do some much needed homework. Oh look, the Shanghai Composite just gapped down 6% on open...</div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com9tag:blogger.com,1999:blog-8367859501985515786.post-56251696480268870002015-08-22T16:30:00.000-04:002018-08-25T13:38:40.784-04:00$20: Going bust.<div style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">
<div style="text-align: -webkit-auto;">
<h3>
<b>Changing Up</b></h3>
Maybe limit just wasn't my game, or so I reasoned. I had a cynical outlook--<b>it was all just a fucking crapshoot</b>. Playing solid tight-aggressive poker pre-flop wasn't sufficient enough for anything more than a small edge. There was zero nuance or creativity in post-flop play* because nobody paid attention--they just played their hand and smashed the call button if they had a non-0% chance of winning. I didn't want to be patient anymore. It had been a month of going nowhere. It wasn't validating my talent or intelligence.<br />
<span style="font-size: xx-small;">*I would later learn how wrong I was to think that... which I will detail in the next part.</span><br />
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<h3>
<b>Back to my Roots</b></h3>
I re-directed my focus to the $5 Sit'N'Go tournaments (SNG's). It felt right.</div>
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<i>It's the style of play most similar to home games, where I first honed my game.</i></div>
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<i>It's the game I had most practice in on the play money tables.</i></div>
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<i>I can finally play creatively and make moves.</i></div>
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<i>I can protect my hands and not </i><i>worry about 6 different players sucking out on the river.</i></div>
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<i><br /></i></div>
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My tournament game didn't have a lot of sophistication but I understood certain principles unique to tournament-style poker. I had the right fundamental habits.<br />
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<ul>
<li>I adjusted my play to how expensive the blinds were getting relative to the chips on the table.</li>
<li>I'd avoid over-committing without a big hand and only probe with small bets to steal small-medium pots in early stages.</li>
<li>I wasn't going to 3-barrel my entire stack to some random dude I've never seen play just to be a hero.</li>
<li>I would steal blinds in late position and be aware of others who were doing it to me (and counter attack by expanding my range to 3-bet, if necessary)</li>
<li>I was cognizant of the gap theory: If the hand is raised when it gets to you, you need a better hand to call than you would need if you were the one making the raise.</li>
<li>I avoided sub-optimal late game/short-stack decisions, like calling for a flop when pot committed or limping pre-flop when short-handed.</li>
</ul>
<div>
<br /></div>
<div>
<b>Mini-rambling on poker strategy, feel free to skip</b></div>
<div>
Now, all of this is super basic to any experienced tournament player, but at the absolute lowest stakes, most players don't have a clue and commit ultra simple mistakes that give up a huge chunk of value each hand. This is not the same "mistake" as misreading someone's hand on a big decision in a huge pot like <i>whoops,</i> <i>he did have the flush, guess I lose.</i> It takes talent, skill, and experience to develop hand-reading ability--and even the best will get it wrong (or make the correct decision and still be "wrong") because it's inevitable when acting upon imperfect information. Navigating these decisions is what separates decent from good, and good from great. But there are decisions in poker, especially online poker where there's no element of reading physical tells, that are just axiomatic and require zero talent to make. An absurd example would be folding pocket aces pre-flop in a cash game--that is clearly always the wrong decision and it's self-evident if your objective is to make money. A more practical example would be a late-stage tournament raise/fold situation, where calling is never correct. For example, take a heads up tournament situation where both stacks are shallow (low multiple of big blinds, pot-commitment is 1-2 bets away), the button raises, and the big blind holds a low pocket pair. It's never correct to call instead of re-raising (even folding would make more sense than calling) because there are just about zero advantages to seeing a flop, whereas a re-raise has 2 primary advantages -- 1) committing when you're more certain you have the edge (as opposed to having to make a tougher decision to bet out of position when 3 high overcards flop) and 2) your opponent might fold and give up his equity in a coinflip situation ( assuming he likely has 2 overcards). There's a clear cut right and wrong decision, situational context doesn't matter, and there's no real debate. </div>
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Anyway, enough rambling. My point is, I didn't do stupid shit while my opponents often would. So I had that going for me.<br />
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<b>
Day 1</b></h3>
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My account was pretty much right back at $20. I had enough for 4 buy-in's. I waited until school finished to play so I could devote all my attention towards building my account for the weekend.</div>
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I placed in my first one (either 2nd or 3rd). That was a good sign. </div>
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I played for the entire day--just one table at a time, so I could maintain scrupulous attention to every player's betting action. Every edge counts.<br />
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<br />
I finished slightly up that first day and felt encouraged.</div>
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<h3>
<b>Day 2</b></h3>
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And then Sunday came around.<br />
<br />
And so did Mr. Variance.<br />
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I kept playing.<br />
<br />
I kept bubbling out in 4th.<br />
<br />
It was like I was playing a recording of the same SNG over and over and over again. Early on, I'd get some playable hands pre-flop that didn't hit. By the middle stage when the blinds start to mean something, my stack would bleed away while I endure several rounds without a pot. Then I get to the bubble and somehow, the other short stack improbably manages to survive multiple all-in's. Then I'd have to flip for my entire stack and Pokerstars gives me the one-sided coin--heads they win, tails I lose.<br />
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I go through a string of SNG's without finishing in the money, all the way down to my very last buy-in. My last chance to prove that I am worthy.</div>
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I busted out on that one too. </div>
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5 weeks and just like that, I burned through my initial deposit. I painfully checked the cashier to confirm.<br />
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I wish I could remember losing in dramatic fashion. And that because there was no justice in the world and because online poker is obviously fucking rigged, a miracle runner-runner royal flush sucked out against my straight flush and busted me out in 4th while having the exact equal amount of chips to the chip leader. That would be the story I'm telling to my kids, my grandkids, and any poor, unsuspecting stranger at a casino while I pontificate on the horrors of gambling and the abyss of total bullshit that was online poker. </div>
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But the reality was, it was just another tournament. 10 years later, in the present, while writing this story, I don't remember anything about how I busted out. They were all the same tournament to me. I was just some punk kid trying to grind SNG's with a shoestring bankroll and I went on a bad run.</div>
<br />
Seeing that zero in my account... it was all I could think about. It was a mark of failure.<br />
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<h3>
<b>I'm broke.</b></h3>
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<i>Ugh, now it's time for school. </i><i>Goddamnit.</i><br />
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<h3>
<b>Wait no, I'm not.</b></h3>
</div>
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I still had the remaining $25 on PayPal.<br />
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Reload it baby.<br />
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Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com6tag:blogger.com,1999:blog-8367859501985515786.post-47631477688030737052015-08-09T14:29:00.000-04:002015-08-23T19:43:51.443-04:00$20: Nickels and Dimes<div>
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<h3>
Starting From The Bottom</h3>
I had read about all these stories of college students making money on Party Poker and Stars--18-23 year old turning $100 deposits into $1000, $10,000, $100,000, and live WPT/WSOP appearances. Some would rise from micro-stakes all the way to the nosebleed stakes, from $5 pots to 5 figure pots. I didn't see any reason why I couldn't do the exact same thing. I had a mission in life now. Why study for a biology exam or make friends at school, when I could make money? <i>Yeah, you do your homework, I'm going to make a few hundred bucks in an hour.</i> It was more than a financial opportunity or a hobby, it became an identity--my path to subvert the traditional, expected route of accumulating good grades to get into a good college, then attending grad school and/or taking some boring job. I convinced myself I was so cool because I was playing a card game.<br />
<br />
That $20 had a real meaning to it and perhaps became too important. It was everything. I had to make sure I never go broke. I had a plan to survive.</div>
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<br />
<i>I am going to grind it. </i></div>
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<i>I am not going to play too high. </i></div>
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<i>I am not going to be stupid and risk it all at once.</i></div>
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<i>I am not going to risk even half my bankroll in any situation. </i><br />
<i>I am going to feast on the easiest, fishiest tables.</i></div>
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<i>If I just get to maybe $100, that should be my safe never-look-back point.</i></div>
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<i>I am going to grind it. </i></div>
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<i>I am going to be a goddamn turtle!</i><br />
<i><br /></i></div>
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<h3>
Fish in a Barrel</h3>
</div>
<div>
Even though I first learned and had primarily played no limit tournament style, I decided to play limit hold 'em to grow my bankroll instead. Why?</div>
<div>
<ol>
<li>I wanted to stick to conservative, responsible bankroll management. At the time, the lowest limit stakes were .05/.10, meaning I would have 200 big bets to work with. 200x BB was a simple rule of thumb for determining how much one needed to survive variance at any particular game. The alternative was to play no-limit cash games, where $20 was full buy-in, or $5 SNG's (Sit'N'Go, a single table tournaments with 9 players)--after doing the math, I felt my bankroll would be too vulnerable to an unlucky run.</li>
<li>All the good books at the time were for limit hold 'em games--in particular Hold 'em for Advanced Players by 2+2's David Sklansky. Harrington On Hold 'Em (the first great book for tournament play) wasn't out yet. There was almost nothing out there for no-limit cash games besides Doyle Brunson's lone chapter in the ancient Super System--which didn't provide a whole lot of amazing insight beyond "play aggressively".</li>
<li>My observation of online micro-stakes limit play: <b>everyone calls pre-flop</b>. How hard could this game be? Was it going to be fun, creative, "makin' moves" type of poker? Heck no, but I'll have fun making money.</li>
</ol>
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<h3>
<b>Variance giveth...</b></h3>
</div>
<div>
The players at these tables were trash. You might as well donate your money away if you're calling 4-bets pre-flop with any hand. Regulars from higher stakes would routinely stop by and raise every single turn just to let off steam. $.05/.10 LHE was the absolute gutter of Pokerstars--who gives a fuck about nickels and dimes?</div>
<div>
<br /></div>
<div>
I didn't even need any actual skill like hand reading or bluffing, I just had to be patient. I played rock tight--I'd commit money on only 12-15% of my hands (this excludes blinded hands where money is already committed) pre-flop. I memorized a cheat sheet for hand selection based on position and prior action (based on how many players in and how many bets to call). I thought this alone would be enough for a substantial edge. The fish would drop their money on the ground and all I have to do is just wait there, with my aces and kings, and pick it up.</div>
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<div>
I opened a couple .05/.10 tables and committed myself to textbook, vanilla ABC poker. It worked right away.</div>
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Within my first week, I got my account up to $30. Not too shabby, I thought. At this rate, I'd move up to .25/.50 in no time.</div>
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<h3>
<b>...and taketh away...</b></h3>
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<div>
But after peaking around $40ish, things kinda slowed down. I wasn't able to sustain the win rate I had during that first encouraging week. In fact, it seemed like I would end every day's session as a slight loser. I was taking more than my fair share of bad beats and tough pots.</div>
<div>
<br /></div>
<div>
The fishies always catching their draw on the river.</div>
<div>
My pocket aces and pocket kings getting cracked.</div>
<div>
Losing capped pots where I had to cry-call my 2nd best hand down to showdown.</div>
<div>
<br /></div>
<div>
My account melted right back down to where I started, $20. That didn't feel very good. That sense of "progress lost" ate at me. <i>Hmm... this doesn't feel as easy as it should be.</i></div>
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<div>
But hey, it's poker. That's the game!</div>
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<div>
This was expected. <i>No big deal.</i> A sophisticated, savvy, experienced online player understood how nasty short-term variance could get, and while I wasn't exactly a grizzled veteran or anything, I had learned about the trials and travails of others who had been successful. Great players experienced weeks long or even months long downswings. They remained patient and fought through it. </div>
<div>
<br /></div>
<div>
I'm just running bad. Getting unlucky. When everyone calls pre-flop against your pocket aces, your expected value actually goes up even if your win probability for that particular hand goes down. In the long run, I still had an edge as long as I play with the probabilities on my side. I'm still smarter than all of these idiots. I'll beat this game. My turn to have the good run is just around the corner.</div>
<div>
<br /></div>
<div>
This was the happy face I was trying to put on.</div>
<div>
<br /></div>
<div>
<h3>
<b>...and now making me his punk</b></h3>
</div>
<div>
Thousands of hands later...</div>
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...more of the same. It's as if my account had a magnet to always revert back to $20. </div>
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Variance toyed with me. <i>Is it normal to be *this* unlucky? Am I special?</i> My attitude towards the game started to change. My beliefs started to change. I was not having fun. Each bad beat would have a cumulative impact on eroding my patience and cold rationality. No more happy face for me. On each showdown with a non-nut hand, I would be waiting for the other shoe to drop. <i>Let's see who sucked out on me with a 2-outer this time...</i></div>
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Instead of thinking situationally and mathematically for each given hand, I would draw hasty conclusions based on my emotions--cynical, fear-driven emotions influenced by a string of tough beats or a recent downswing. <i>Of course I'm beat. I knew my hand wouldn't hold up.</i></div>
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I had enough. </div>
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It was time to play real poker where I could bet more than one unit, take players out of the pots, and protect my made hands. </div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com5tag:blogger.com,1999:blog-8367859501985515786.post-49392769856840049462015-08-06T15:51:00.000-04:002018-08-25T13:38:31.573-04:00$20<div style="font-family: Tahoma; orphans: 2; text-align: -webkit-auto; widows: 2;">
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How I Turned $20 into... the subheading for my future E-Book title</h3>
Sometimes when I'm indulging my ego and I want to feel good about myself, I like to think of how I would want to be described in a book or on an introduction on TV.</div>
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That's what I do. I crop together specific life moments to create a narrative that shines on the best aspects of my life, and then I craft an entire identity around it. It validates me. It overcompensates for the other not-so-cool aspects of my life, like the social anxiety, the total abyss of a personal life, and the dulling pangs of inadequacy. I stop paying attention to that stuff because<i> I'm money baby.</i></div>
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The story I like to tell at bars to make myself look cool and special is the story of how I learned how to make money--and that story starts with <b><u>$20 dollars</u></b>.*<br />
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<span style="font-size: xx-small;">*BTW you know what's great about that number? It's just so small and always will be. One day I might get lucky in a random angel investment or venture capital deal and bink a 50-bagger, and move my net worth past 8 or even 9 figures--the real, "I'm important and I matter" kind of wealth. Maybe lightning strikes twice and I become a billionaire. Regardless, as long as I don't go broke and keep my personal equity growth continuous, I still get to say I started with only twenty fucking dollars.</span></div>
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<b>Special Snowflake</b></h3>
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This is me.<br />
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I'm 14 and starting high school. I like to watch sports and play video games. I don't have any friends. I'm roughly average at everything I do. I'm not particularly interesting.</div>
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Despite constantly being told "your education is the most important thing in the world!" while growing up, I had stopped caring about good grades and academic achievements. In 2nd grade, I once beamed with pride after my teacher referred to me as "Speedy Gonzalez" after I was the first to finish the multiplication tables classwork. In 7th grade, I received a D in algebra and my dad wanted to disown me. I'm not really sure what happened to derail me off that track. In an alternate universe, maybe everything hums along from K to 12 and I'd have been an archetypal high-achieving prep student who ends up being a doctor or lawyer. I righted the ship enough to avoid pissing off my parents but deep down, I thought being too attached to high grades was a sucker's game.</div>
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But it's not like I was good at the stuff that did capture most of my time and attention--take gaming for instance. I spent <i>years of my life </i>playing Starcraft... and I would still get my ass kicked by a simple zergling rush. The zergling rush (aka the '4pool rush') is the Starcraft equivalent of the <a href="https://en.wikipedia.org/wiki/Scholar%27s_mate">4-move checkmate</a>--if you <i>seriously</i> can't figure it out, then quit early because the game is just not for you. </div>
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-KwdVdYwegWk/VcJO4yDwObI/AAAAAAAAAi8/SiyBP3eTfTQ/s1600/4%2Bpooled.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="318" src="https://3.bp.blogspot.com/-KwdVdYwegWk/VcJO4yDwObI/AAAAAAAAAi8/SiyBP3eTfTQ/s320/4%2Bpooled.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: "tahoma"; orphans: 2; text-align: start; widows: 2;"><span style="font-size: xx-small;">needless to say, I stopped playing ladder matches and stuck to friendly, cooperative custom games instead</span></span></td></tr>
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You know those "millennials are too entitled and always think they're special" articles that run on the New York Times or Vox or HuffPo every month or so? Yeah, that was me around that age. I saw peers score higher on tests, achieve more in sports and extracurricular activities, receive all kinds of awards and praise, and develop rich, fulfilling social lives while I sat on my ass and did nothing--and I <i>still</i> thought I was better than everyone else.</div>
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I just needed to be good at something--something that <i>proves </i>just how special I am. Then I would show 'em all and everyone would be begging to be my best friend.</div>
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Kiddie Pool Games</h3>
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It was the summer of 2003 and I was staying up until 2am flipping around TV channels to cure my boredom. Something new caught my interest on ESPN2.</div>
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They show poker on ESPN now? This is... kinda cool.</div>
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How come I can see the hands they're playing on the screen?<br />
What does "check" mean?</div>
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There's poker on the internet now?</div>
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Is Moneymaker his actual birth name?</div>
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Why do I have a hunch that I could be <i>good </i> at this game?</div>
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I had all kinds of questions. I had to know more. <span style="text-align: center;">Poker became a deep obsession. I had to play as much as possible. I had to study it and hone my game. I had to </span><i style="text-align: center;">win.</i></div>
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I'd read through almost all the book in the Barnes and Nobles gambling section. Super System, The Theory of Poker, Caro's Book of Tells, Phil Hellmuth and Ken Warren's shitty books... eventually I sorted through all the noise and focused only on the TwoPlusTwo books--the highest quality publications.*<br />
<span style="font-size: xx-small;">*not as true now as it was in 2004 due to massive growth in the poker education biz</span><br />
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<a href="http://4.bp.blogspot.com/-JixBdG5YTIw/VcJaJRum3pI/AAAAAAAAAjs/Ex2o8tXXGgw/s1600/reading%2Babout%2Bpoker.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="305" src="https://4.bp.blogspot.com/-JixBdG5YTIw/VcJaJRum3pI/AAAAAAAAAjs/Ex2o8tXXGgw/s320/reading%2Babout%2Bpoker.png" width="320" /></a></div>
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I started off playing online play money tables. It was addicting at first (and helpful for internalizing the rules and getting "up to speed") but my enthusiasm tapered off quickly when I realized none of the complex, high level post-flop play I had relentlessly studied was applicable to play money tournaments--a table style best described as a pack of degenerate jackals spam clicking the "all-in" button.</div>
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Full Tilt Poker had these massive freeroll tournaments (no entry fees) that paid out peanuts to the top-3 finishers. I think first place was $10. I must have played hundreds of them. My pinnacle achievement was finishing 3rd place to win a grand total of <b>THREE WHOLE DOLLARS! </b><br />
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That $3 was going to be the start--the start of my dream to become a millionaire professional poker pro. It was going to be destiny. That $3 was <i>everything. </i>My dreams. My entire life's hope.<br />
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I also played in home games organized by my older sister's friends.<br />
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It was here when I started observing how the every-man thinks while playing the game. My sister was an honors student enrolled in majority AP classes and applying for top-tier universities, and naturally, most of her friends and classmates were in the same boat--smart, capable, overachieving, and at least decent at math. Higher level poker concepts were easily within their grasp. Yet of maybe the 15-20 different guys from that circle, I remember only a couple that made any attempt to study the game's more advanced concepts. Maybe a few more had cursory knowledge of super basic stuff like hand probabilities (four-flushes, straight draws, etc) and pot odds through TV segments or cheat sheets, but that was it. The first step towards vastly improving one's game was to simply fold total garbage hands pre-flop, which is kinda just common sense if you think about it, and they wouldn't even do that.<br />
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I found it interesting how many players were willing to put their money at stake without even the slightest clue (interest?) that they had an edge in the game. Did they think they knew enough already? Were they not aware of this greater universe of knowledge out there? Did they care?<br />
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<tr><td class="tr-caption" style="text-align: center;">well if they don't want their money, I'll gladly take it...</td></tr>
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This went on for about a year or so, but I got tired of taking $5 buy-in's from broke high school students and playing "all-in or fold" lottery poker on those time-consuming Full-Tilt freerolls. I had something to prove and I wanted to play for keeps.</div>
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I just needed a bankroll.</div>
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<h3>
<b>.002 Stacks of High Society</b></h3>
Being only 15, I was ineligible to make online deposits under my name. I guess I'll just ask my parents--they see how much I love playing poker every day, I'm hopeful they'll think it's a good idea.</div>
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I approached my dad. Here's how that went:</div>
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<a href="http://1.bp.blogspot.com/-AJNPd0RISZ0/VcOEkWG4HxI/AAAAAAAAAlI/1OFxWhHK0lw/s1600/asking%2Bmy%2Bdad%2B2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="480" src="https://1.bp.blogspot.com/-AJNPd0RISZ0/VcOEkWG4HxI/AAAAAAAAAlI/1OFxWhHK0lw/s640/asking%2Bmy%2Bdad%2B2.png" width="354" /></a></div>
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His response was "No". Welp, I tried.</div>
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I needed another plan--and I didn't quite know what that plan was going to be, but my sixth sense for hidden opportunities and exploiting loopholes took over and slowly pieced it together.<br />
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Lucky for me, poker sites had pretty lax money movement protocols back then. Pokerstars had a player-to-player cash transfer feature that would essentially bypass any bank or merchant processor. There was also no identity verification process (at least until you wanted to cash out). They didn't care to know anything about who was putting money on the table--"money on the table" was all that mattered. You just had to confirm you were of legal age by checking a box, no different than a porn site basically.<br />
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Now I only had to find my guy on the other side to transfer the money. I didn't know anyone but somebody out there had to be already exploiting this. There's just no way I'm the first to think of all the possibilities. After several weeks perusing the sketchiest corners of online gambling forums and googling phrases like "underage poker deposit method" I found exactly what I was looking for:<br />
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An E-Bay listing for a $25 "poker hat"*.<br />
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small; text-align: start;">*I never got that hat...</span></td></tr>
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The details were inside: "<i>Will also transfer $20 in Pokerstars real money credit, along with hat</i>".</div>
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<b>Bingo!</b> That was my ticket in. I still had to ask my parents to deposit money on PayPal but that would be a much more innocent request than asking for a direct deposit to an online gambling site. I've bought baseball cards and Pokemon cards off E-Bay before too--I mean, that's what you think of when E-Bay is mentioned, isn't it? Collectible items. Weird tokens and souvenirs. Fan memorabilia. Haha, I'm just a geeky kid with geeky interests looking to buy some stuff, nothing to see here.</div>
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I asked my mom for $20 on PayPal to "buy some stuff on EBay".. I was prepared to say "sports stuff"* if further interrogated, but I did not have to. She gave me $50, no questions asked.<br />
<span style="font-size: xx-small;">*poker's a sport, right?</span><br />
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Crossing both fingers that I wasn't being scammed, I confirmed my $25 PayPal transfer. <i>One time, please let this be real. I need this $20, it's my destiny, o</i><i>therwise I'll be a loser forever! </i>My transaction partner told me he sent his $20 and that I should receive it shortly.<br />
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5 minutes after, I started holding my breath. I kept checking my account balance.<br />
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$0.00.<br />
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Hm, okay, no big deal. I paced around. I ate some peanut butter. I sat back down and checked again.<br />
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Still $0.00.<br />
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What if he tricked me? No, he definitely tricked me. He's laughing at me all the way to the bank with all his stupid scammer buddies. He's probably the same asshole who scammed me with all those duped items in Diablo II. Do I call PayPal for a reimbursement? What if I they find out I'm doing something illegal? Will PayPal call the FBI on me? Am I old enough to be charged for a felony? Is it true what they say about what happens in the showers in federal penitentiary? Fuck, check again!<br />
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<b> $0.00</b>. fuckfuckfuck.<br />
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I sent one of those annoying panicky e-mails that accomplishes nothing except confirm to the recipient that you're a panicky little loser who panics too much--<i>it's been 11 minutes, where's my money? y u scam me?</i> He promptly replied that Stars customer support has to approve every transaction. Well he wouldn't even reply if he outright scammed me right? I took comfort in that. My logic is sound. He is a good person. He clearly and obviously did not scam me.<br />
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On what was probably around the 274th click, another number replaced $0.00.<br />
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<a href="http://2.bp.blogspot.com/-eATSKoYELvk/VcOVJsTd9LI/AAAAAAAAAl0/o3ZaA1cLFjY/s1600/POKERSTARS.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://2.bp.blogspot.com/-eATSKoYELvk/VcOVJsTd9LI/AAAAAAAAAl0/o3ZaA1cLFjY/s1600/POKERSTARS.png" /></a></div>
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My life changed.<br />
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<b>(will write the rest of this in installments... which assumes that I don't stop blogging for months at a time again)</b><br />
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<a href="http://ptotrading.blogspot.com/2015/08/20-part-ii-nickels-and-dimes.html">Part II: Nickel and Dimes</a><br />
<a href="http://ptotrading.blogspot.com/2015/08/20-going-bust.html">Part III: Going Bust</a></div>
Petehttp://www.blogger.com/profile/14003395833748639890noreply@blogger.com6tag:blogger.com,1999:blog-8367859501985515786.post-35953557538414325692015-01-25T14:12:00.001-05:002015-01-25T14:15:46.105-05:00What can a prop trading firm offer you? Guide 1.0<span style="font-family: inherit;">So this is a question that I receive a lot, which I briefly addressed in my FAQ, and deserves its own lengthy treatment. </span><br />
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This is a guide addressing the pro's and con's of trading on your own vs. trading for a firm. This is NOT a guide on how to get a job at a top notch prop firm (the answer to that is easy: A) develop a track record, B) if you are a student, get a degree in quantitative sciences) or on what every individual firm offers. I'll update it periodically.</div>
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<span style="font-family: inherit;">First, you have to think of trading as your career and each firm as an individual company that has its benefits and drawbacks. You have to start with a self-evaluation--asking the right questions. </span></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-NfEfOzCmtrM/VMU01EjKPpI/AAAAAAAAAbE/5uQ5vXNqH4E/s1600/self-inventory.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-NfEfOzCmtrM/VMU01EjKPpI/AAAAAAAAAbE/5uQ5vXNqH4E/s1600/self-inventory.png" height="180" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">If only you could adjust those sliders with a button click like in Madden</td></tr>
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<span style="font-family: inherit;">You have to consider your own <b>starting point:</b></span><br />
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<ol>
<li><span style="font-family: inherit;">Are you out of college or working in another job while considering trading full-time?</span></li>
<li><span style="font-family: inherit;">Do you have savings or can you get staked by someone else to establish a trading bankroll?</span></li>
<li><span style="font-family: inherit;">Do you have enough savings or earnings power to sustain the costs of living while learning on the job?</span></li>
<li><span style="font-family: inherit;">What is your experience level? Not just whether you trade or not, but how well do you even understand the industry? Do you know for certain what your desired asset class, timeframe, and strategy would be? </span></li>
<li><span style="font-family: inherit;">What other skills do you have? i.e. coding/programming</span></li>
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<span style="font-family: inherit;">Trading has opportunity costs. Developing a skill takes time and capital. Most traders lose money when they start out--and the less you know, the more you will lose. Reducing the "tuition costs" of trading is a good thing. What is your plan for doing it on your own? Is it to join one of the plethora of trading education sites out there that teach you a momentum-based strategy? Is that even the trading style that best fits your personality and </span>temperament? </div>
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<span style="font-family: inherit;">If you're a student who wants to trade but has trouble raising cash, it might make more sense to find a firm that can back you and see where it leads. Your mindset should focused on your development and your future. Are there good people there to help you get to where you want to go?</span></div>
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<span style="font-family: inherit;">If you're an experienced trader with an established track record or an independent guy who makes consistent income, your mindset should be that you're the guy interviewing the firm and not the other way around. What are they offering you that you otherwise can't get somewhere else?</span></div>
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<b><span style="font-family: inherit;"><u>What can a prop firm offer you?</u></span></b></div>
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<li><span style="font-family: inherit;"><b>Fully-backed risk</b>. In my opinion, this is the absolute minimum you must have when you are deciding to trade prop. It's the essence of being a prop trader, otherwise what is the point? Why not stay at home and just use a regular broker? There are some firms that will give you a 95/5 split if you put up a deposit, but there is practically zero difference between doing this and trading as a DIY retail guy.</span></li>
<li><span style="font-family: inherit;"><b>Salary or salary draw</b>. Some firms offer a salary to new traders. These firms are usually not equity prop firms looking for discretionary traders who trade their own ideas or their own system. The firms that pay a salary usually have some kind of structural edge--for example, they spent millions investing in technology that gives them a speed advantage as market makers.</span></li>
<li><b style="font-family: inherit;">Structural edge</b><span style="font-family: inherit;">. There are firms where 90% of the pieces are in place and you just have to teach the trader to execute. They built some kind of technology and system where you basically buy the bid and sell the offer (if not exactly that, then playing some kind of niche role in the market that </span>facilitates<span style="font-family: inherit;"> order flow or exploits price </span>inefficiencies<span style="font-family: inherit;">), minimize risk, collect a pay check, and go home. There is far less discretion on what you can do, you are told to do XYZ with very little variation. This might be a drawback for traders who are more apt for directional/idea-based discretionary trading rather than being a cog for a firm-wide strategy.</span></li>
<li><span style="font-family: inherit;"><b>Proprietary technology. </b>Some firms have a proprietary platform or can offer an additional tweak to whatever you're already doing. For example, you look for certain statistical arb patterns and the firm has technology that can help you data-mine the information more efficiently. Or you trade breakout patterns and you can build an algorithm or gray box to automate your execution.</span></li>
<li><span style="font-family: inherit;"><b>More capital</b>. This can matter in a couple ways: 1) those with higher risk tolerance can take larger bigger position sizes 2) helps traders that have a strategy that requiring high buying power maintenance, such as long-term portfolio/basket trading or spread trading against futures</span></li>
<li><span style="font-family: inherit;"><b>Different asset classes and styles</b>. You don't learn a whole lot about automated trading, pairs trading, statistical arbitrage, news-based trading through the current trading books or education sites out there. Most of the well-known prop shops in Chicago specialize in this kind of stuff. We all have different strengths, we can't all be chart reading short-term technical traders. </span></li>
<li><span style="font-family: inherit;"><b>Lower cost</b>. Lower than retail obviously. At my firm, I was charged a rock bottom per-share base cost (the commission, excluding ecn and regulatory fees) that was less than half of what I'm charged on my current retail brokers. It should be a red flag if a firm cannot provide a cost lower than the average retail margin. Sadly, I know a burn-and-churn shop that I live a few blocks away from in the financial district that's actually charging ABOVE retail rates to ignorant college kids who have no idea what they're doing. They make money off commissions and push their traders towards ineffective high volume/low margin trading strategies.</span></li>
<li><span style="font-family: inherit;"><b>Professional mentoring/training program. </b>Help you develop as a trader.</span></li>
<li><span style="font-family: inherit;"><b>Idea-sharing and building a network.</b> Being around like-minded professionals to share trade ideas.</span></li>
<li><span style="font-family: inherit;"><b>Friends. </b></span><span style="font-family: inherit; text-align: -webkit-auto;">There's something to be said about forging a bond while in the trenches with other traders. The traders who manage to stick around "get it"--the uncertainty of the job, the up's and down's, the never-ending learning curve, the desire to push, the same aha moments. They end up being great guys to enjoy a beer with for the rest of your life.</span></li>
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<b><span style="font-family: inherit;"><u>Potential disadvantages of prop-trading</u></span></b></div>
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<li><b>Profit split. </b>Obviously, there's going to have to be a tradeoff for anything you receive from above.</li>
<li><span style="font-family: inherit;"><b>Exam requirements.</b> Having to spend time on acquiring Series 7, Series 55/56 license, etc. </span></li>
<li><span style="font-family: inherit;"><b>Higher data fees. </b>Ever looked at the <a href="http://www.nasdaqtrader.com/Trader.aspx?id=DPUSData">fee structure for data feeds</a>? Notice how it's two-tiered structure for "professionals" and "non professionals", with the professional tier being charged a lot more. This annoyed me quite a bit. Once you're at a prop firm, you're a "professional" and some equity prop firms pass on data subscription costs by subtracting it from your overall balance.</span></li>
<li><span style="font-family: inherit;"><b>Less control. </b>Since it's not your money, you will likely not have final say on risk and capital allocation. This might not be a bad thing for less experienced traders. </span></li>
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<b><span style="font-family: inherit;">Going through the pro's and con's: why I decided to leave*</span></b></div>
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<span style="font-size: xx-small;"><i>*I was going to leave irrespective of that FNMA loss</i></span></h1>
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<span style="font-family: inherit;">Simple. I weighed the benefits against the costs,mainly the opportunity cost of giving up 50% of my profits, and decided it wasn't worth the trade-off. I felt it was easier to earn $500,000 by generating $500,000 in profits on my own, rather than earning $500,000 by generating $1,000,000 in profits at my firm.</span></div>
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<span style="font-family: inherit;">I visualized a mental pie chart of where my money came from.... this is all in my head with no real math involved.</span></div>
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<span style="font-family: inherit;">Core strategy = money made on idea-based price action trading</span></div>
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<span style="font-family: inherit;">Prop strategy = money made on strategies that could not be traded outside the firm due to lack of access or proper technology</span></div>
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<span style="font-family: inherit;">Algo's = money made through use of algorithms created by the firm's proprietary software</span></div>
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<span style="font-family: inherit;">Cost advantage = the lower marginal cost of trading by trading at the firm vs. trading retail</span></div>
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<span style="font-family: inherit;">Some of the other successful traders at the firm would have a different pie chart with more weighting in the "prop strategy" or "algos" section, and it made sense why they stayed as long as they did rather than leaving to trade their own money. There were traders who were making six figure sums in the last 15 minutes of the day by taking positions in stocks in the Russell 3000 on the day <a href="http://www.russell.com/indexes/americas/tools-resources/reconstitution/default.page">the entire index was being re-balanced</a>. I won't go into the exact details but they needed the platform and the buying power that the firm provided to execute this esoteric strategy. For some of the guys, I could definitely see it being easier to make $500,000 by making $1,000,000 trading these "prop strategies" at the firm.</span></div>
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<span style="font-family: inherit;">Were these areas future growth opportunities? Absolutely. But I decided the best growth strategy would be to learn to scale up on what I did best and could do by myself--idea-based price action trading. I wanted to build on my strengths rather than expand horizontally into areas where I felt less competent. It's all just a business decision.</span></div>
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<b>Exta-curricular reading:</b></div>
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<a href="http://wallstcheatsheet.com/interview-knowledge/the-inner-workings-of-prop-shop-first-new-york-securities-with-co-presidents-donald-motschwiller-and-joe-schenk.html/">Interview with Co-Presidents of First NY Securities: Inner Workings of a Prop Shop</a></div>
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<span style="font-family: inherit;"><br /></span></div>
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<b><span style="font-family: inherit;">Future posts:</span></b></div>
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<span style="font-family: inherit;">Different types of firms</span></div>
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<span style="font-family: inherit;">Temp-trading at the worst prop firm ever during Hurricane Sandy</span></div>
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Equity prop trading in the 1990s -- the golden age that will never come back</div>
</div>
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