Dispatches from the Front

[dbphoenix]

The idea of of tape reading is very similar to a pit trader at the CBOT or Merc trading off of flow. In other words, the best floor traders made their money front running large orders, getting good flow from brokers, and reading the flow in the pit. Once that flow went to the screen and became fragmented, the bond floors became ghost towns. The front month Euro Dollar futures are so empty now you could sell rugs down there.

The edge was in having single listed markets. Where all the paper and flow came to you. You know what everyone was doing and when they were doing it. This applies to options as well. The equity option floors are a ghost town.

The only viable pit left is the SPX pit at the CBOE. Know why? Because all the paper still goes to the floor. They are the only exchange that trades that product.

Once you start splitting up and fragmenting order flow, the game of trading off of it is over. That's the bottom line.

With the ECN's getting more and more of the volume for listed stocks and the new trade through rules going into effect in October, the market is going to become very fragmented. What does this mean?

It means now the buyers and sellers are going to be harder and harder to find. They might be bidding for stock at the NYSE and offering it out on the ECN's. Now instead of watching one tape for a stock you will have to follow all the tapes. This will make trading a lot of stocks near impossible. The writing is on the wall.

There is a reason why most of the equity only shops have folded. It's not because of the penny spreads or the low volatility. In fact, we actually have a great trading market now. They folded because the most consistent day traders were tape readers and most of them are leaving the equity shops. That leaves you with all the bottom and top pickers that inevitably blow out within months. Why do you think Don Bright is pushing what's left of his daytraders into pair trading?

No, I do not daytrade anymore. I left the game when they took away bullets. That was awhile ago. I also left because you can't build a long term career daytrading. At least not in the money management business.

Maverick 74

 

[ljyoung]

Db,
Maverick 74 (although he does have other monikers) is, IMO, someone worth listening to. I stumbled across him while slogging through ET trying to find something intelligible about T&S (T2W has very little on T&S). He gives an excellent description of what the tape is and how he used it in the past when he was daytrading. I am sure you already know this but others may not. He is sharp and humble.
Although we may have differences of opinion about some things, I share your sentiment with regards to this man.
ljy

 

[andycan]

all markets going electronic does not sound like a bad thing
you are absolutely right the pit knew the flow of money and which direction now they are almost on an even ground except they have a lot more money
but i disagree that buyers will be harder and harder to find, maybe for the market makers of old or the specialists from the NYSE but where ever there is the potential to make 'Quick Money' you will get crowds and where there is crowds there will always be greed and fear

 

[dbphoenix]

[ ]'s approach profiled here can be very effective in real time, but definitely takes experience to operate correctly. Any use of oscillators and crossovers to trade with always involves various degrees of pattern recognition.

Experience in real time over the course of time is how we define the term "feel". I have absolutely no doubt [ ] can "see" things on his chart others cannot as of yet due solely to experience at work.

There is no way to export experience from one trader to another via any communicative means. [ ] has laid out a simple approach which works for him... all of the little nuances and individual twists can only be learned by each person thru weeks, months and years of live observation.

Instant success via A-B-C follow some rules does not happen in our profession. It is a lot longer road to success than that, with an equally high level of reward once you get there.

Be patient, take your time, watch the squiggly lines do their thing across the charts for a few months & years. It all comes gradually clear over time!

Best Trading Wishes
Austin

 

[dbphoenix]

Do you find it best simply to go away and play golf when you're not in tune with what's going on?

No... a pilot needs X amount of hours in the air... we need screentime.

You won't find a market's rhythm or a system's signature on the golf course.

Realtime screentime separates the back-testers from the traders.

You don't need to trade but you do need to sit there and go through the process of watching trades form, especially if it is a new timeframe for you.

T28

 

[dbphoenix]

Although trading for yourself and working in corporate america has it's distinct differences, they mimic each other in that they both carry a certain level of stress and frustrations. Many folks have a surreal impression that (day)trading does not necessitate long hours, hard work, stress, or personal sacrifices.

I have spent the better half of my professional life despising coming to work each morning. This obviously affected my personal life and the level of happiness that I would achieve. My sole goal in life was to obtain the level of capitalization that would allow me to live freely without being a slave to the rat race. Unfortunately, this path is a lengthy and treacherous one without any guarantee of success. Years of my life rolled by while I worked away at trying to increase my funds and lot sizes. Trying to advance in your career and building a trading plan simultaneously was a burden on myself and my family. I continuously told myself that in X years, this would be all behind me. That may be true in a perfect world, but I soon realized that my goal may have been reached in 2 years, 5 years, 10 years, or possibly never. All I focused on was the future and how I would carve my path to financial freedom. All the while, I missed out on many opportunities to enjoy life in general.

I will tell you that this is no different whether you are a lawyer, CPA, or a trader. The goal is still there and I am by no means saying that these goals are not valid. What I am saying is that there must be a balance between enjoying your personal life and generating your income.

Fortunately, I had a very abrupt wake up call when I was almost involved in what would have been a fatal motorcycle accident a year ago during labor day weekend. Ever since then, my whole perspective towards work, the daily routines, and life overall had a 180 degree change. I continue to trade because I love it and I find it incredibly intriguing. However, I no longer force such high expectations upon myself that would cause undue stress as a result. If I have a good month, great. A bad month...oh well.

In regards to your complaints about the daily routine, it is entirely up to you to make the changes in your life that will allow you to find happiness. It is up to you to find a positive trait out of every negative situation. If you miss interaction with other people, make it a point to meet folks after the day is over. Take the time to reach out to old friends.

Before you decide on changing professions, remember that there is no one single job that is perfect. The reason that people love their jobs is because they choose to find the positive aspects of what they do and disregard the negatives. Now if you cannot find anything positive about what you do or what you would like to do, then it becomes a problem. In this case, a career change is in order. However, for the most part, I believe that this is only necessary in extreme circumstances.

Whether you decide to continue trading or pursue a career in selling pet rocks, remind yourself that time is the only resource that cannot be replaced. I almost lost my life a year ago. Take it from my experience.

Your life is what you make of it.

Optionspoet

 

[dbphoenix]

The Green Bathrobe Story

By the third day of their honeymoon in Las Vegas, the newleyweds had lost their $1,000 gambling allowance. That night in bed, the groom noticed a glowing object on the dresser. Upon closer inspection, he realized it was a $5.00 chip they had saved as a souvenir. Strangely, the number 17 was flashing on the chip's face. Taking this as an omen, he donned his green bathrobe and rushed down to the roulette tables, where he placed the $5 chip on the square marked 17. Sure enough, the ball hit 17 and the 35-1 bet paid $175. He let his winnings ride, and once again the little ball landed on 17, paying $6,125. and so it went, until the lucky groom was about to wager $7.5 million.

Unfortunately the floor manager intervened, claiming that the casino didn't have the money to pay should 17 hit again. Undaunted, the groom taxied to a better-financed casino downtown. Once again he bet it all on 17 - and once again it hit, paying more than $262 million. Ecstatic, he let his millions ride - only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel.

"Where were you?", asked his bride as he entered their room.

"Playing roulette".

"How did you do?"

"Not bad. I lost five dollars".

 

[bracke]

And the moral is......... or is there one?

Regards

bracke

 

[dbphoenix]

1. I walk down the street
There is a deep hole in the sidewalk
I fall in
I am lost, I am helpless
It isn't my fault
It takes forever to get out

2. I walk down the street
There is a deep hole in the sidewalk
I pretend I don't see it
I fall in again
I can't believe I am in the same place
But it isn't my fault
It still takes a long time to get out

3. I walk down the street
There is a deep hole in the sidewalk
I see it there
I still fall in....it's a habit
My eyes are open
I know where I am
It is my fault
I get out immediately

4. I walk down the street
There is a deep hole in the sidewalk
I walk around it

5. I walk down another street

Portia Nelson

 

[firewalker99]

Why Smart People Make Big Money Mistakes And How To Correct Them

And the moral is......... or is there one?

Regards

bracke

There is more than one obviously.
Read more at http://www.amazon.com/Smart-People-Money-Mistakes-Correct/dp/product-description/0684859386 and scroll down to "chapter 1".

 

[bracke]

firewalker99

Thank you for the link it was very interesting. I think that we differentiate the value of our money on a daily basis eg moan and groan about the cost of a central heating pump but happy to spend a larger amount on a pump for a pond.

In trading we often told not to trade with money that we can't afford to lose. This seemingly suggests that trading money is not so important, a similar scenario to the Green Bathrobe Story.

Regards

bracke

 

[dbphoenix]

You must remember that obvious things are not profitable in the long run. Many of the "simple" systems people push work well for long stretches, but give no indication when that stretch occurs, and have losing trades that kill the profitability of the system. These losing trades happen very infrequently, so to someone who does not thoroughly back-test, the system looks good. But they are just setting themselves (or their clients) up for a predictable fall.

Because these killing trades exist in the system, and the system traders don't know when they will surface, every losing trade ends up a possible system killer. You end up questioning the system, and not following the plan fully anyway. Though, because the system itself is bogus in the long run, the lack of following it is not the main problem here.

When you have done enough research, you will not fear your drawdowns. You will expect them. Following the system will be easy, and completely stress free.

-Raystonn

 

[Jbat001]

The Green Bathrobe Story

By the third day of their honeymoon in Las Vegas, the newleyweds had lost their $1,000 gambling allowance. That night in bed, the groom noticed a glowing object on the dresser. Upon closer inspection, he realized it was a $5.00 chip they had saved as a souvenir. Strangely, the number 17 was flashing on the chip's face. Taking this as an omen, he donned his green bathrobe and rushed down to the roulette tables, where he placed the $5 chip on the square marked 17. Sure enough, the ball hit 17 and the 35-1 bet paid $175. He let his winnings ride, and once again the little ball landed on 17, paying $6,125. and so it went, until the lucky groom was about to wager $7.5 million.

Unfortunately the floor manager intervened, claiming that the casino didn't have the money to pay should 17 hit again. Undaunted, the groom taxied to a better-financed casino downtown. Once again he bet it all on 17 - and once again it hit, paying more than $262 million. Ecstatic, he let his millions ride - only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel.

"Where were you?", asked his bride as he entered their room.

"Playing roulette".

"How did you do?"

"Not bad. I lost five dollars".

Just a small point I noticed - how come he only puts on his robe to go downstairs and play, and then ends up walking several miles back to his hotel?

*pedantic @rsehole alert* :cheesy:

 

[firewalker99]

Just a small point I noticed - how come he only puts on his robe to go downstairs and play, and then ends up walking several miles back to his hotel?

*pedantic @rsehole alert* :cheesy:

That would probably be because he taxied to another hotel
"Undaunted, the groom taxied to a better-financed casino downtown. "

 

[Jbat001]

That would probably be because he taxied to another hotel
"Undaunted, the groom taxied to a better-financed casino downtown. "

Ahem, as always, RTFM...... I am a dumbass......

 

[dbphoenix]

One of the most important errors that traders/investors make with regard to charting -- whether they are fundamental skeptics looking for "proof" or newcomers to charting who are interested in developing and improving their skills -- is dwelling on what happens after the point of action.

Granted, the serious student of markets will want to examine and analyze his trades so that he can improve upon his strategy. But that is not quite what happens in actuality. What happens in actuality is that the trader, whether amateur or professional, beginner or experienced, at the point where he would ordinarily act or is required to act, thinks not of what is in front of him but of what happened the last time he was in a similar trade. For example, if he sold the last time and watched the stock bounce and resume its advance, he thinks that the same thing may happen this time and holsters his gun, even though his current and applicable strategy tells him that he ought to sell. At that point he's trading not on the basis of strategy but on the basis of hope. Whether the stock does in fact rise or plummets to its daily low is beside the point.

In this regard, whatever happens after the trade is closed is irrelevant. All that is relevant is the strategy, and one must be able to approach the stock fresh as soon as the trade is closed. In order to do that, one must be able to look at what is happening now, not dwell on what happened in the past. Only then can one even consider re-entering a position in a stock which he sold perhaps minutes earlier.

One may make three or more entries in a row that don't work out, but he must be willing to re-enter at the first sign that conditions are right according to his strategy, even if those conditions present themselves almost immediately. That may seem like a lot of in-and-out, but that's trading. If one feels that he is over-trading, he can simply stop and watch, observing the action without emotional entanglement. He may find that he shouldn't be in the market at all.

He may also find that he's just not suited for a timeframe so brief and that he's more suited for a longer timeframe, though the patterns he requires for entry -- such as a base or double bottom -- may not exist in a longer timeframe, just as daily patterns often disappear in a weekly chart.

It all comes back as it always does to keeping it simple and knowing oneself, even if that means knowing oneself only well enough to determine that one doesn't want to mess with any of this. Anyone who doesn't want to make the journey has plenty of funds to choose from.

BW

 

[dbphoenix]

I've spent some time lately rereading some old posts, and stumbled across one of the more scornful debates from 2000: the case of the $12,000 harpsichord.

Many of you likely remember the subject, others may have heard reference to the infamous harpsichord but had not known the history of it. It has, by now, entered the lexicon of the LBYM [Living Below Your Means] board, usually as a representation of a frivolous expenditure. So, indulge me a moment while I recap the story.

A little over a year ago, on the first of March, a user started a thread titled "The NOT so Dumb things that you bought?" There had been some discussions about dumb things we'd all spent money on (f)oolishly, but one user wanted to discuss things that may have been a little more expensive, but turned out to be well worth the money.

One user on that thread posted:

I bought a new, French double-manual harpsichord, custom-made for me by one of the world's most famous builders, for $12,201 in 1984.

This caused quite an uproar, even prompting another poster to say:

This is the "NOT" so Dumb things you bought thread. Try reposting.

...to which the original poster replied:

OK, here goes. I bought a new, French double-manual harpsichord, custom-made for me by one of the world's most famous builders, for $12,201 in 1984.

Good enough for you?

The price tag was daunting for many people, as was the object that money was spent on. Most people wouldn't consider a harpsichord to be a necessity, or a luxury, or even a vaguely interesting item to have.

A few weeks later, on another thread, the poster explained his purchase a little more:

For me, the harpsichord decision was pretty easy. I had the money, and I had been looking at kits for at least 10 years. But I am not handy, and trying to build one myself would have resulted in an expensive piece of useless junk. The decision at the time was harpsichord vs. new car, and the old car, while tired, still got me to work.

Needless to say, the old car started putting out white smoke and needing a quart of oil every 200 miles, about 4 months after the harpsichord was delivered.

So when it was all over, I had a harpsichord and a new Renault Alliance. That was right for me. Another person would have preferred no musical instrument and a BMW. That's fine too, but it wouldn't have been fine for me, because cars for me are just transportation and not an attempt to express my personality or to demonstrate my riches. The music, on the other hand, is very important, for now I can hear Bach and Scarlatti as they might have heard it themselves, just less competently played.

As for how you get to have enough disposable cash to make either sort of decision, the tips on the board can help -- some. Obviously, clipping coupons is not going to put you into a BMW anytime soon. But they might pay for a special birthday meal, or tickets for the children to see "The Lion King" if it goes on tour, stuff like that.

For this poster, the harpsichord was of immense importance. No doubt such a purchase would make sense for very few people, but for someone who expresses this kind of interest in music and had a lifelong passion for it, it became understandable.

This was written over a year ago. Here is the update to that story:

The person who bought the harpsichord was JABoa.

Let that sink in a moment. This is the gentleman whose death last week was lamented far and wide across the Motley Fool boards. He was either 52 or 53 (I'm not sure when his birthday was).

Jim would be disappointed if someone didn't play the role of pedant with this information, so here goes: He said he bought that harpsichord in 1984 for $12,201. Let's say he had invested that money instead. Let's even be generous and say that he could have earned 12% on that money. That would have been an extra $83,773 in his bank account today.

Unfortunately, he met an untimely death. Now, do you suppose that during the past 17 years he got more happiness out of that harpsichord than he would have out of having several thousand dollars more in his savings?

Only he could have answered that, but considering that his love for music was highlighted in his obituary, I suspect he'd still pick the harpsichord.

Am I saying we should all drop what we are doing, quit saving, and spend spend spend since there may be no tomorrow? Not at all.

My message here is there are times to pick your battles. Cut out waste and save money where you can, but if there is something that feeds a personal passion, there is nothing wrong in figuring out a way to make a dream come true.

As with most things in life, you can have anything you want--you just can't have everything you want. Pick your battles, set your priorities, and go for the things on the top of your list.

As is often said around here, the "L" in "LBYM" stands for "living."

--WonderPup

 

[dbphoenix]

Everyone says it: "Keep it Simple, blah blah blah..."

But no one tells us how to keep it simple. If it was that simple, then why doesn't anybody tell us about keeping it simple. Would it be that hard?

Lots of trading magazines and books have already told you that. They tell you to keep it simple by not overcomplicating things with indicators, etc, and if you read enough of them, it all comes down to price, time, and volume along with the basics of stop loss, risk management, etc.

That is the concept, and that is THE SIMPLEST FORM that anyone, including your mentor, is able to tell you. Don't expect someone, including your mentor, to tell you when to buy and when to sell without experiencing the market yourself and further enhancing yourself. Your mentor can tell you so much with trendlines, S/R , or once x setup happens, then price most likely will go up or down. The market changes and can go against you anytime. After you experience the market and actually trade to a point/level of breakeven, you will know how simple -- but not easy -- the market action and trading is.

It's almost like the game of baseball. I tell you it's a simple game. All you do is just hit the ball by swinging the bat when the ball is coming at you, especially a fastball which usually comes in straight and fast, about 95mph, and this pitcher is usually going to give you fastballs. So with this knowledge, you think it's easy and step up to the plate with confidence. Then the pitcher does throw a fastball ball to you. From your perspective, it seems to be coming in at 95 mph. So you take a big swing, but by the time you swing the bat, the ball has already whizzed by you. Sorry, you misjudged it because the ball was coming in at 99, not 95 mph. Could've hit a homerun or extra base hit if you had swung at it a split second earlier.

Then on the next pitch. You are sitting on a fastball, and this time you swing a bit earlier than last time. But sorry, this time you swung too early; the ball is NOT coming in at 99 mph, but at 91 mph, and at a slightly different location. But hey, it's still a fastball. Why did you miss it!??

So you, getting pissed off or a bit pressured and scared, are now waiting for the next pitch, perhaps your last one. This time you will try to time it correctly. The pitch comes in. Ah, it's a slower one, going at about 85 mph. You wait a bit and swing perfectly at the perfect time. But still nothing. The ball drops down suddenly and you are left with nothing but swinging at air. The pitcher (market) psyched you out with a nastly sinker. You lose.

Hey, forget the last pitch, but you had 2 chances to hit a fastball. I even told you he is going to give you fastballs, and I told you the behavior of a fastball a thousand times. But why did you miss it? It's so simple!?? It's direct and it's fast, but watch the speed and also the location where it's about to be. If it's outside your reach, don't swing. If it's within your reach, swing at the location where it's coming in. That's it! See, it's simple, and that's the simplest form I can put it in. Don't understand why you still can't hit the ball!

Hope you get the point.

--bwc

 

[dbphoenix]

So many of my consulting clients are entrepreneurs who have capital to trade with because they worked their tails off in another business. They take that strong work ethic and need to feel busy into the markets and get whacked. I have helped many of them instantly increase their returns by simply decreasing their trading activity. By cherry picking out the most perfect setups from the endless stream of valid trades they find, their win/loss ratios as well as average risk/reward rise dramatically.

Personally, I trade rather infrequently when compared to the rest of the active trading world. When I did a real time trading forum, I would get grief all the time for not giving enough traders...being "lazy". Quite the opposite, I am finding and passing on 9 out the 10 valid entry points I see. In daytrading the E-Minis, I want to find the one spot in each session that has the potential to deliver a big move, and will pass on the myriad opportunities to grab a point or two.

Why? Simple experience. If I grind it out a few points at a time, the edge is thin, I am mentally tired at the end of the day, have tons of commissions to pay, and will not really make that much more at the end of the month for this increased effort. I have had too many months where I worked like a dog to make 30 ES points daytrading, with all the drawdowns and frustrations of the whipsaws, only to realize that the 3 swings I took paid me 28 points in profit, and never induced much stress at all. I would rather trade those swings with greater size, and then have the rest of my days free for research, relaxation, writing, whatever!

For those of you still striving, remember... Once you "get it", you have to be trading a style that allows you to...

1: have a life
2: have time to enjoy the fruits of your hard HARD work.

Otherwise why bother? Trading is freedom... don't do the work to obtain that freedom, then cast it off to become a market slave!

-- Bo Yoder

 

[dbphoenix]

I somewhat got myself into a bind. I trusted a moderator on a pretty big stock/forex forum and let him handle a 10k forex account. In 1 week I am down 9k.. Holding on to my last 1k but unlucky enough its deemed as a bagger in audusd down 700 dollars so far. He wants me to add more money to keep the margin but I just dont have the guts to do it anymore... so depressed. He told me he has been doing it for a long time 15 years in the biz. There isnt anything I can do is there? I want to feel reinbursed somehow but i know he would never give me half of what he lost... well if i need to i can post the history and see what you guys think i can tell you he place 4lot orders at a time and the first two being going long on usdjpy.. He also wants me to put money into crownforex b/c he thinks he can average 200 a day on 5k account. I am not knoledgable enough to trade forex myself as i know would be the best way so there is nobody to blame but myself.

acdspit