Frequently Asked Questions

I'm a wordy guy; I like to write a lot. I want to draw pictures for everything and improve my mediocre MS paint skills. I want to address every little nuance of every topic. Every broad topic will have its own post. I have a dozen drafts in my evernote already for topics like poker, prop trading, cryptocurrencies, and personal experiences that represent the intellectual/psychological trading concepts that are familiar to all traders yet so hard to express.

This FAQ is just for the quick answers. This will be updated continuously, whenever I feel like it.

Q: Who the hell are you? (personal information stuff, basically).
Name's Peter To. I'm 25. Born/raised in Orange County then moved to New York in June 2011. I traded with a hedge fund for 3 years then left to trade my own money.

Q:  How did I get started?
I played online poker in high school (2004-2007). Told my mom I needed $25 on paypal for some baseball cards (I never said what I'd purchase actually, but it was implied), instead I purchased $20 in Pokerstars transferable money through Ebay. Turned that into $20,000, which later became my retail trading bankroll. My interest in the market started in 2008 when everything was going to hell. I went through a goldbug phase (I bought actual gold coins) and then a value investor phase (I bought AAPL at 79.50 and sold at 99). Then I learned more about day trading and felt comfortable enough with on an intellectual level (understanding my edge) to try it out. My first day trade was shorting AIG when it went parabolic.

Q: How did you learn how to day trade?
Short answer for now: I learned from others, including traders at my firm.

Q: What are the best books to read on trading?

For trading psychology, anything by Dr. Brett Steenbarger (read his blog too)
For a philosophical understanding of price action/sentiment based trading, Reminiscences of a Stock Operator
For inspiration and to understand how professional money managers think, Jack Schwager's Market Wizards seriesMore Money than GodInside the House of Money
For market microstructure, Trading and Exchanges
For algo-trading (not my expertise), try this one

Other good reads:

Q: Can you teach me how to trade?
Hands-on mentoring? Not doing that right now. I tweet about my day to day trading and I don't dumb down the terminology for anyone, that's the most I can offer.

Q: Should I try day trading?
No. 90% failure rate is real.* Better/safer to put your money in index funds and/or get a real job.
*the traders that succeed don't ask and if they do, they'd eventually disregard what I or anyone else has to say

Q: Should I do what you do and trade fast momentum strategies?
There's no one right way to trade. You have to find the strategy, timeframe, and asset class that makes sense to you. Also need to determine whether to trade manually or try to design an automated system. Plenty of ways to make a buck.

Q: Why do you trade stocks and not [futures/forex/bonds/options/swaps/derivatives/dogecoins]
I understand stocks and how they move better than the other asset classes. It took a long time to develop that understanding and I suspect the learning curve would be the same for other assets. Better to scale up on the edge that I know than try to expand horizontally into an entirely new asset class. Also, I can trade index/currency/commodity ETF's if I want to, with enough buying power to size up to the appropriate risk.

Q: Can I give you my money to trade?
No. I'm not a professional money manager.

Q: So if I gave you $1000, you could turn it into--
UGH....don't ask that.

Q: What are the pros and cons about prop trading vs. trading on your own?
There's a long post coming on that one. But the short answer is actually another question -- what can a prop firm give you that you cannot attain on your own? Salary? Deeper pockets? Fully backed risk? Superior technology? Structural or strategic edge? Co-workers to drink with? Social status (so people don't assume you're some gambler trading in his PJ's when you tell them you day trade and so chicks can dig it when you drop "hedge fund trader" on 'em)? Each firm is different so it must be a case-by-case evaluation.

Q: Why did I leave my prop firm?
I answer that here with regards to that large loss on FNMA. But irrespective of that situation, I was planning to leave soon anyway. Why? I thought very carefully about what they offered me (and they did offer several advantages that are unattainable for retail traders) versus what I had to give up (which was a split of my profits) and decided it wasn't worth the trade-off. Simple as that.

Q: How do you choose which stocks you trade?
We can talk about my FINVIZ scans, top gainers/losers, looking for large gaps and whatever, but there's a core philosophical answer here: I am looking for stocks that trade with a lot of emotion. Does that mean expanded range and volume? Yes. But it's more than that, there's also an intangible quality... the "story" driving the stock. A stock can gap up with above average volume but have a fairly straight forward "story" -- like a retail clothing company that announces very good earnings. How many participants will have a different thesis on that event? Probably not too many. What's on the opposite spectrum of that? Think about HLF -- which had multiple billionaire HF-managers on both sides of the trade. Think about the average investor who was long and now thinks this arrogant suited-wearing mother fucker bashed his stock with blatant lies and distortion. Now that's a story. Those are stocks that trade well intraday.

I could write an essay about this so let's just end it there.

Q: Something something about bitcoin trading? (IS IT THE CURRENCY OF THE FUTURE?!)
Long post coming on that one. Come back soon.

To be answered later...

Q: What broker/platform/tools/sites do you use or recommend
Any ultra specific trading questions (like hard stops vs. mental stops)

1 comment: