Janes Addiction, "Up The Beach"

Unbelievable...

The RO Report, "Simulator" Edition

I almost took today off. After the carnage yesterday, I had all those Market Wizards in my head telling me to take my foot off the gas.

Instead, I found a compromise. I went surfing early and realized, as I was out there bobbing in the water that I was doing far more good for myself surfing, than trying to force trades. I had the best session of my life. It was amazing. Immediately afterwards I wrote about the experience which I'll probably post in a couple of weeks.

After I came back, I traded on the simulator. I lost $17,490 on the simulator. So, in a way, I actually made that money since I would have lost it had I been trading live... get it? DT Wins Again!

Anyway, the office did okay. Out of 28 traders, 18 were gross positive or 64%. 4 traders made over $1,000 gross, and 1 trader lost over $1,000.

Enjoy the long weekend. I have a full week of posts ready to fire next week, including a history and an around the house.

"Lucky Pierre" - Trader A, $5,984 on 76,124 shares traded.

2. Trader 9*, $2,854 on 2100 shares traded.
3. Trader 10*, $2,513 on 0 shares traded.
4. Trader K, $1,135 on 32,400 shares traded.
5. Trader F, $690 on 18,600 shares traded.

"Chambermaid" - Trader H*, -$1,655 on 7,300 shares traded.

2. Trader D, -$558 on 114k shares traded.
3. Trader L, -$428 on 31,400 shares traded.
4. Trader G, -$397 on 59,200 shares traded.
5. Trader V, -$264 on 14,200 shares traded.

The Week In Review

Lucid Films Presents - The Stimulus Package

Atom.com: Funny Videos | Extreme Humor | Sexy Comedy

(Irreverent and NSFW)

I say pay the Somali pirates to heckle the illegal Japanese whaling ships.

The more that comes out about the salmonella peanuts, the more it stinks. It also highlights how insecure our food supply is.

Note: 123456 is not a good password...

Amazing passive solar house in Iceland. I find things like this inspiring.

Prospectus is blogging again and he's spilling the beans on Richard's sex life!

Take back those bonuses!

I still don't Twitter. Soon I'll be in the minority.

Hilarious new blog about Digg. Zen and the Art of Digg. Dude, "friend" me.

Great Moments In Willful Ignorance. The Reformed Broker runs a very funny and consistent site. It has become a daily read for me.

It's been a tough week. Here's some inspiration in the form of a squirrel.

Enjoy the day off on Monday.  I know I need it!

Radiohead, "You And Whose Army?"

When you're losing in this job, it feels like you're fighting a war.

The RO Report, "Fuck The PPT" Edition

Whether or not you believe any of the conspiracy theories regarding the "PPT," or the Plunge Protection Team, you have to admit that the way news stories suspiciously drop at important market levels is very coincidental to say the least.

The RO got completely fried this afternoon when some news dropped at 3:05, just as we were breaking the lows of the morning.

Anyway, I have a sick family and this market is trying its hardest to make me sick too.

Here's the numbers.

Out of 29 traders today, 8 traders were gross positive, or 28%. 3 traders made over $1,000 and 14 traders lost over $1,000 gross. Many lost a large multiple of $1,000. I was #21 of 29 adding a lot to my worst streak of my career.

"Chambermaid" - Trader Z, -$32,481 on 89,000 shares traded.

2. Trader C, -$31,486 on 290k shares traded.
3. Trader N, -$26,680 on 109k shares traded.
4. Trader F, -$11,642 on 137k shares traded.
5. Trader A, -$8,162 on 216k shares traded.

"Lucky Pierre" - Trader 10*, $1,627 on 2,800 shares traded.

2. Trader R, $1,107 on 24,806 shares traded.
3. Trader M*, $1,068 on 0 shares traded.
4. Trader X, $187 on 4,200 shares traded.
5. Trader G, $155 on 26,000 shares traded.

What a disaster.

An Odd Interview

Pointed out to me by "Trader X" from the RO, not the more famous Trader X.

This dude has a nice beard.

The Gods Have Conspired Again

To put off publication of my new history post, "Sympathy For The Maria."

No doubt it is due to the controversial nature of this post.

Anyway, Judy fell a bit ill last evening preventing me from having the time to edit it down. Been a tough week for blogging over here.

Barry Manilow, "Copacabana"

Awful. Worse, I'm not even sure if I'll get that history post up tomorrow. Time has been short.

The RO Report, "Surfing" Edition

When I surf, I generally use my longboard. And waves that are good for longboarding tend to be more forgiving than a good shortboarding wave which is typically steeper and faster.

Due to some utter stupidity during my last hour of trade, I nearly "manservanted" myself on a day I knew wasn't good for trading. As punishment, I took my shortboard out and head to the shore. I'm an awful shortboarder and I took some nasty wipeouts...

Anyway, the RO managed to have a solid day. The early morning run in gold and commodities was played well by a number of traders.

Out of 28 traders today, 17 were gross positive or 68%. 6 traders made over $1,000 gross and 4 traders lost over $1,000 gross. I was #23 of 28. Disgraceful.

"Lucky Pierre" - Trader A, $12,907 on 75,800 shares traded.

2. Trader D, $7,245 on 123k shares traded.
3. Trader B, $6,164 on 129k shares traded.
4. Trader C, $2,813 on 74,400 shares traded.
5. Trader E, $2,508 on 20,100 shares traded.

"Chambermaid" - Trader Z, -$2,720 on 49,300 shares traded.

2. Trader P, -$2,319 on 24,200 shares traded.
3. Trader 10*, -$1,811 on 2000 shares traded.
4. Trader V, -$1,671 on 59,200 shares traded.
5. Trader R, -$694 on 37,500 shares traded.

Click here for the heatmap.

And here for Brian's take.

Quiet Blog... Quiet Market

Could a storm be brewing?

Clusterfuck To The Poor House - The Stimulus Package

See? Jon Stewart can grill the Dems as well.

The Daily Show With Jon StewartM - Th 11p / 10c

Clusterf#@k to the Poor House - The Stimulus Package

Daily Show Full Episodes
Important Things With Demetri Martin

Funny Political News
Joke of the Day

"Starfish Hitler" Slows Publication of "Sympathy For The Maria" History Post

I made a valiant effort, but was unable to defeat this thug in time to publish my weekly history post. It will be up tomorrow.



For the remainder of the day, I will resort to my third-tier blogging skills to provide you with enjoyment. Perhaps I will punish myself by watching a Dennis Kneale segment.

The Fleet Foxes, "Mykonos"

The RO Report, "No Squeeze" Edition

If you were bearish on this market all day and waiting for an opportunity to get short, you were likely frustrated. There was no bounce, no squeeze, just steady selling.

The internals were completely disgusting. The XLF was down 10%. Crude oil is pinned. We are poised precariously over the lows made about a week ago. After that, we go to the November lows.

I turned CNBC on today for the first time in months. I was all about listening to Geithner explain The Plan. I was unimpressed. I also wasn't big on the dog and pony show afterwards, when he did his live interview with Brian Williams and Steve Leisman.

It made me very afraid. I feel very dark.

There is no doubt in my mind now that we'll be revisiting those November lows soon. After that I'm not sure what the fuck is going to happen, but I don't think it will be pretty.

Despite all the gloom and doom, the RO had a great day and I repaired at least a little of the damage that I inflicted upon myself recently. Out of 30 traders today, 25 were gross positive or 83%. 16 traders made over $1,000 gross, and 3 lost over $1,000 gross. Solid numbers across the board. I was #13 of 30. Very happy.

NOTE: I am trying hard to get the history post up tomorrow. If it doesn't happen, it will be up Thursday.

"Lucky Pierre" - Trader Z, $18,168 on 228k shares traded.

2. Trader B, $17,141 on 335k shares traded.
3. Trader H*, $10,329 on 18,100 shares traded.
4. Trader P, $9,746 on 262k shares traded.
5. Trader C, $9,219 on 149k shares traded.

"Chambermaid" - Trader 10*, -$2,927 on 2,900 shares traded.

2. Trader 6*, -$2,618 on 100 shares traded.
3. Trader G, -$1,749 on 110k shares traded.
4. Trader U*, -$831 on 3,700 shares traded.
5. Trader 9*, -$498 on 2,000 shares traded.

This heatmap looks like a bad joke, but it's real.

Richard Dennis: Market Wizard

I read the Richard Dennis interview from Market Wizards during the tumult of last week. I can say surely, that had I listened to one particular message from the interview that I could have saved myself $5,000. Schwager asks what to do when things aren't going well. Dennis cautions that, "a certain amount of loss will affect your judgement, so you have to put some time between that loss and the next trade." Indeed.

Since my troubles from last week are still rather close-at-hand, I can say undoubtedly that my judgement was clearly affected by my losses.

For example, at one point last week, I was going to war with GS. Just shorting it over and over again because I thought the move up was overdone and that the stock should be going down. When I looked back on my trades in GS, I was surprised to see that it was perhaps the strongest stock on the exchange the day I was shorting. Was I expecting it to go from the strongest to the weakest or something? Hoping to get lucky?

That wouldn't have worked... according to Dennis, luck accounts for "absolutely zero" when it comes to trading success. Instead, it was like I entered into a little bubble of hate and GS was the only stock on the exchange to trade.

Furthermore, when I was involved with these "unlucky" trades, I couldn't imagine it going higher when it was trading $89. Then at $90 I thought, "it's just gonna pop above and scum back down to trap longs."

At $94, I don't remember what I was thinking, but I'm sure it was dark.

This illustrates another important point made by Dennis: "You should expect the unexpected in this business; expect the extreme. Don't think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I've been in this business, it is that the unexpected and the impossible happen every now and then."

Had I been able to take a couple steps back, clear my head and have some perspective on the trade, I could have saved myself thousands of dollars. If you get into this situation, take Dennis's advice. I'm not sure how much time needs to pass, but do something to clear your head, trade another stock and do something different than what you are doing.

It doesn't come as a surprise to hear that Dennis (like Marcus and Kovner) lost money initially. But despite his early setbacks, he had "a need to try to succeed." People ask what a trader needs to do well. Some people think you need a "good head for numbers" or "an ability to analyze data." That stuff won't hurt you. But first, a potential trader must have that desire to try to succeed on his own.

Dennis reserves a certain amount of vitriol for the stock market. He says stocks are "random" and that they didn't offer enough fundamental information to create a real trend to trade. Or, as he succinctly puts it, "There is not enough information, not enough fundamentals. Just nothing going on." 

Damn commodity traders!

But despite his adoration for commodity trading, he bemoaned the growth of computerized trend trading and all the resulting false breakouts he believed were due to too many people watching for the same patterns. He then made a rather dark prediction, "There will come a day when easily discovered and lightly conceived trend-following systems no longer work."

Man, I thought... everything I do is lightly conceived! But I also thought of Trader X, and his new patterns and this made a lot of sense. The patterns are constantly changing and it's our job as traders to find them.

His critique of Keynesianisam is interesting and oddly enough, timely given the current environment. "Keynesian economics was a solution to the problem of over-saving and under-consumption, which was a fair enough attempt to pull us out of the Great Depression. The problem now is the exact opposite: under-saving and over-consumption."

Market Wizards was published in 1989... can you imagine how much worse the problem of under-saving and over-consumption has grown in the last 20 years? The best you can say is the the near future should prove to be a very interesting time to live, though not necessarily comfortable.

Finally, Dennis throws at least one specific trading rule our way, and while I'm not a swing trader, it makes sense. He explains, "it is important not to have a short position with a loss on Friday if the market closes at a high, or a long position if it closes at a low."

Okay, with that I leave you to go and make a million bucks.

The Fiery Furnaces, "Widow City"

The RO Report, "Sleep" Edition

We were locked in a low volume 100 point range today as the world awaits The Big Plan To Save The World.

It's funny, but reading "the Fly" last night and how he spoke about Reagan and deficit spending blended nicely with my reading of the Richard Dennis interview in Market Wizards, which I'll be discussing here tomorrow. In the interview, Dennis says that deficit spending is going to ruin the country.

Perhaps, 20 years later he will be proven right.

Anyway, more on that tomorrow. Not much to discuss. Everyone traded light and the RO did an exceptional job of preserving capital.

Out of 27 traders today, 21 finished gross positive, or 78%. While that sounds great on the surface, there were many sub $200 gains today. No one did much. The RO was rangebound. I placed very few trades and was flat, minus a small overnight from Friday that gave me a loss on the day. I was #24 of 27, which seems almost unfair on a day I did absolutely nothing...

Trader B pulls off another "doubledong" as he and his swing account gain the top two spots.

"Lucky Pierre" - Trader H*, $3,045 on 12,000 shares traded.

2. Trader B, $2,624 on 82,000 shares traded.
3. Trader D, $2,418 on 100k shares traded.
4. Trader C, $1,869 on 60,200 shares traded.
5. Trader N, $1,329 on 76,600 shares traded.

"Chambermaid" - Trader A, -$1,571 on 187k shares traded.

2. Trader 9*, -$621 on 3200 shares traded.
3. Trader M*, -$606 on 0 shares traded.
4. Trader S, -$104 on 4,571 shares traded.
5. Trader V, -$72 on 41,000 shares traded.

Brief Thoughts On A Bad Week (or two)

So each Monday I post and explain a good trade from the previous week.  Unfortunately, after de-balling myself last week, I find I don't have much to work with.

Instead, I will say the following.  I had a real war going on with myself, trying to decide whether I was pushing myself out of some "comfort zone" as far as my position sizing or if I was really fucking myself up, psychologically. Ultimately, I believe I will look back on the last two weeks as a positive.  It is always good to push yourself in this occupation and I learned a few things about myself regarding discipline and focus.  Namely, discipline isn't my strong suit and it's better for me not to "focus lightly" when trading.

While having somewhat precise rules is comforting to a certain extent and makes the job less stressful on many levels, I found that they stripped me somewhat of my instinct.  Instead of getting out of winning positions, or at least "lightening" them, I found myself holding for larger rules, as long as I wasn't getting stopped out per my rules.

In short, I had a hard time balancing my rules versus my instinct.

However, and this is really what caused my massive losses, when positions went against me, I often didn't exit fast enough, because I began believing in my positions too much.  So I was using the rules to keep me in positions, but not using them properly to exit positions... a rather deadly combination...

I will leave you with two final thoughts that I heard last week.

First, from my father, who knows that when I start thinking about money, I cripple my ability to trade.  He said, "If you are thinking about the money, then you are not focusing on the right thing which is the trade.  Instead, you are trying to make back the money you lost and this is irrelevant to the trades you are making today."  I thought this was pretty insightful from a man who has never read a book on trading and who still doesn't truly understand what I do each day.

Second, "Trader P" related a thought from the Charles Longstreet book (which, incidentally, will be the third book in the Dinosaur Trader book club).  Longstreet said he'd rather be right 60% of the time and execute his plan 90% of the time, than be right 90% of the time and execute properly 60% of the time.

We'll see how this week goes.  I'm going to work hard on keeping a positive mindset and starting each day with a blank slate.

I sometimes think of myself in graphical form.  If I looked at myself on a 10 year chart, this would be a minor pullback.  Last week I made a huge red candle with a tiny wick off the bottom.  This week let's hope for a big green one closing at the highs.

(Tomorrow I will have a post on "Market Wizard," Richard Dennis.  He also offers a few insights on trading slumps.)

Sunday Space

For de little stealin' dey gits you in jail soon or late. For de big stealin' dey makes you emperor and puts you in de Hall o' Fame when you croaks. If dey's one thing I learns in ten years on de Pullman cars listenin' to de white quality talk, it's dat same fact.

-Eugene O'Neill, The Emperor Jones

What You Missed The Week Of February 1st, 2009

There's no getting around the fact that this week was very hard on me. For the first time in my 10 year trading career, I find myself down on the year. I'm heading out of the house for the weekend and then will return late Sunday afternoon to (hopefully) get in a surf session. Perhaps my victory Friday with the surf session will get my head straight.

Anyway, I started last week with a post about a good trade I made in FAZ. Since I got so blasted this past week, I don't think I can find any particularly good trades to highlight for this Monday's post. Instead, I'll post a bit about the negative mindset I found myself in later in the week.

Each Tuesday I've been highlighting a chapter from the trading classic Market Wizards, and this week I wrote about Bruce Kovner. Coming up this Tuesday, I'll discuss Richard Dennis.

On Wednesday I served up a history post about the trader I called "Char." Since I've had a lot of questions about these posts, let me clarify... all of these characters are based on real people but they are mainly caricatures.

On Thursday, frustrated by the influence of all the powerusers on Digg, I wrote an open letter to these powerusers, asking them what they wanted from me. Many people questioned my sudden obsession with Digg. To you I say, Thursday was a wonderful day for traffic around here.

Finally, on Friday I gave back to the Internets with a large post of links. However, I couldn't help myself when I came across this video of Jon Stewart tearing into Dick Cheney, the worst person on earth, so I had to post it.

Thanks for reading. Tomorrow I'll have my new "Sunday Space" post up.