Thursday, July 31, 2008

July Review

July's been a good month. I think I nearly doubled my P&L from June, which was already a career best month. Through out the first half I was doing really well, I would make two or three good trades and they all turn out to be really good winners. There's definitely a certain mental block I think and once you break through it's easier to get back to that level. That's pretty much what I try to do early July and to ride out my streak as long as possible. I knew it was unrealistic b/c my winning percentage would be in the 70 or 80's. At first it really help me build confidence and taking slightly bigger size but it got to a point where I was scared that the streak would end. Especially sometimes that I double down and add to losers and get away with it. When I talk to Lawrence that I was afraid the streak it going to end he pretty much flat out said "oh yeah, it will." I didn't like that at first; I felt at first almost as he's putting a curse on me. Then I starting to think that's pretty much how trading is... you'll be hot and you'll be cold, you just gotta adjust accordingly.

July kind of cooled down though towards the end. Volume started sucking so I didn't get to finish July as strong as I wanted. Some of it might have to do w/ this stupid temporary Reg SHO the SEC put in place, which at first it was going to end on July 29th I believe but now it's been extended to mid August. Our office has been very good w/ the new change, we had a pool of borrowed stocks in the 19 companies that were included in the list and it would replenish automatically. Really except for a few occasions I think we would have always have the shares to short. I don't really trade the individual stocks as much so it affected me less. The ETF's that track these stocks that I trade might have been distorted price wise like XLF, SKF, KRE, and KBE, but really it doesn't matter to me... I just trade whichever direction the trend it going. It wasn't like nobody out there could short the financials, it's just that you couldn't naked short (shorting w/out first locating the shares to borrow), which is illegal anyway. But who cares, there are people out there doing illegal things on the street everyday anyway.

I've also put some focus into trying out new tools w/ technology for new trades and it's worked on a few occasions. That probably added a thousand dollars to my P&L for the month, plus there are other tools that help me stay in the trade longer or take bigger size although it's harder to quantify how much more money I made.

I've been slacking off on the reading... not good. I need to finish the Mark Douglas book so I can move on to something else.

So, here's to a good July and wish for a crazy August. Fed meeting next Wednesday, we'll have to see what they do. I hope they either raise or cut rate... get some good action going. Enough of this leaving the rate unchanged business.

Monday, July 28, 2008

Conversation with Jon

I met with another HP on Tuesday and watched him trade for a little bit on Wednesday. I really should probably bring a pen and a pad with me the next time b/c some of the stuff we talk about is really valuable and I can't rely strictly on my memory, especially trying to recall almost a week after.

Jon's been trading for about three years now. He was actually neighbors with my coach when Lawrence started. What really surprise or impress me sometimes is how nonchalant he is. Some traders I've met or talk to they're really competitive or they get upset sometimes when they lose money. Jon seems completely confident in his ability, even if he had bad trade he knows he can make it back (that's my impression at least). We talked about this one bad trade which led to the worst day of his career and how he lost a lot of money shorting JRCC as the stock went from $4 to I think $60 and the entire he just has the expression that it was no big deal, you live and learn.
Apparently Jon had done something similar to what I'm doing with another trader. They wanted to interview the top traders out on the floor and publish some kind of magazine (for internal circulation?). He said that one of the top traders told him that it's ok if you lost a lot of money for the day as long as you learned something. It's only a bad day if you've waste the day.

As a trader, Jon says he'll trade just about anything. He'll be in tons of different stocks and some longer term trades. It seems Jon is making a conscious effort to improve his longer term trading as he's made goals in that area. I would love to stretch out my timeline as well once I've established that I'm good at one thing to build the confidence and increase my risk appetite like some of the HP's have. Jon says he typically gets in about 6:45am and scans the IDB headlines and if there's anything that interests him he'll read more in-depth.

The biggest takeaway for me is probably to watch the float and short interest, which I already kind of do but probably doesn't pay attention to it that much and maybe it's more for longer term plays.

Sunday, July 27, 2008

My Weekend

You know, when I started this blog I didn't really think about other people interested in applying for jobs at Kershner would find out much less read my blog, but hopefully this has been helpful in providing some information or transparency to the whole application process. Honestly, I think if I didn't know Nick I probably wouldn't have taken the job myself.

Trading update: July's been good. Really good, in fact. I'll post more in depth personal analysis later. Right now, I want to talk about my wonderful weekend.

First of all, it's great not having to go to any weddings. Originally I was going to take a trip to either LA or NYC this weekend but Brett literally told me that he was coming back from Cali to Texas this weekend for his birthday right before I booked my flight. So I packed all my stuff and left right after some happy hour action after work on Friday to his family's lake house at Coldspring, TX. Well, I realized that I have taken out my SD card out of my hand held and using that in the DSLR instead so unfortunately I don't have a lot of pictures from the weekend. Having to drive 3 hours kind of sucks, but at least gas is cheaper now and who knows when I'll see him again.

I wish I could've stayed longer but Margaret and I have already purchased our tickets to the Roger Creager's birthday show at Gruene Hall a long time ago. Gruene Hall is the oldest dance hall in Texas. Although I wasn't born in Texas or really consider myself a Texan I've been wanting to check the place out for a while. I gotta say, the place is classic country. Everything is how it should be. It's not like those country dance places where it's still very cosmopolitan. When the band gets going, you can feel the floor starting to shake on account it being so damn old. Each plank of wood has its own personality just like the parque flooring of the Boston Garden. The floor is slicker than what I'm used to from the thousands of cowboy boots that have caressed and buffed the floor over the past 130 years.

Margaret and I almost found out how slick the floor is the hard way. Nobody was really dancing the entire night but we want to be able to tell people that we've danced at Gruene Hall when Everclear came on we found some open space in the back and just went to town. Well, first I should say there's this thing that I do that I would spin the girl out and catch her as she spins back in to me and straight into a dip. Margaret doesn't really like this as she is kind of scared that I would drop her since she's moving pretty fast and I kept telling her that she's just gotta trust me. On our first attempt, one of her feet slipped out from underneath her as I go into the dip so I was surprised by all the extra weight and momentum I have to carry... but I caught her. Her pony tail might've touched the floor but I didn't let her fall. After that I think we pretty much cut out all of the heavy spinning stuff that could risk us getting on American Funniest Homevideo.

Oh, and I know this is coming out of the left field quite a bit, but for the first time ever that I actually like a haircut I got here in the States. Yes, I like to do something with my hair but it doesn't mean I'm gay or metrosexual. I haven't really done anything to it in a while so I decided to go for the faux-hawk, except mine is more like a faux-fauxhawk. A fauxhawk is like a mohawk except you don't shave down the sides. Mine is really just a hint of a mohawk, it's very tastefully done. I might post a picture of it, maybe from this weekend's wedding.

Friday, July 18, 2008

Conversation w/ Mike

So I started this thing where I'm taking an HP out for drinks each week. This week was Mike and I already got Jonathan lined up for next week. Mike also told me Anthony would be a good one to talk to as well and that would be pretty easy since he was one of the guys that did the round robin interviews with me.

Mike is predominantly a momentum trader and he gets in big size when he likes what he sees. It doesn't seem like he does anything too special preparation wise for the day, just spending some time watching bloomberg and reading WSJ in the morning. He also uses Thompson I think for more technical levels, which I might have to ask some follow up questions on that.

Since Mike trades a lot bigger size, which obviously I'm not there yet but it's something to think about as my position size gets bigger, he usually doesn't play some of the ETF's he trades unless it's got 1.5 times the average volume for the day. He also watches the NAV. I tried watching it thinking maybe the ETF will converge back with the NAV or have some other theories but basically b/c I couldn't find anything conclusive to validate my theories I stopped watching the NAV but now I think I'm going to pull it up on one of my tapes and see the trend the NAV is making. I don't suspect it'll make a drammatic effect in my trading but it's just another indicator for me to get in/out quicker or judge my position size. Mike also says he uses the NAV for some pre market trading, like couple minutes before the market opens and there are programmed ECN's coming in. If futures gapped up/down big, like 15 points then he'll try to play it and get hit close to yesterday's close.

We also spend some time talking about flipping a trade, which is something I have thought about but when you're in an actual trade and you've just lost money on you sometimes don't think about flipping it to go the other direction or you think you're revenge trading, but if something is breaking the trend then get out and flip to go the other way is one strategy, or if you're getting in front of a big size and that big size is getting hit, go ahead and take your out and flip the other way b/c chances are other people are trying to get out, too.

I also ask him how they're trading BRK shares and really it's no different from any other stock in that it moves in correlation to the futures and the A shares correlate w/ the B shares. The value is a lot higher but you're trading 1 or 10 share lots so the spread is really not that bad. Maybe the next time there's an imbalance I'll play it to get my feet wet b/c otherwise it looks really scary. There are other guys in the office that play a lot of the high dollar stocks like WPO, MKL, Y, SEB, WTM but I don't think I'm there yet, even if Mike says there's some really good money to be made in them.

Mike's imbalance strategy seems a little different from what our pod does. He seems to be getting in big size almost right before the close and then put limit order out just a few cents away to ensure that he'll be able to get out

Other than that, I think I'm on the right track. Some of my strategy are pretty similar to what Mike does so that does make me feel better. What I need to work on is just making good trades and gradually get in more size, like 100 or 200 shares more at a time to increase my comfort level.

Tuesday, July 8, 2008

My Solid Day

Yet another very, very solid day. ODP lowered guidance and OMX went down in sympathy so I got short. Took profits all the way down and finally tried to let the last few ride and set a wider trailing stop and was able to ride it for about a point.

Big Ben came on very early in the morning and I think the news was that there would be more liquidity in the lending market so the Dollar strengthened, driving oil and natural gas down. I personally didn't know quite what to make of all that's happened within the past 24 hrs w/ the whole FAS 140 mark to market and the news this morning and seems like I wasn't the only one so I didn't really trade any EEM or that type of plays until I could see the trend or support/resistance level. That worked pretty well... saved and made me some money. Market broke out of its range and I should've gone long much earlier but I couldn't make up my mind.

There's been a lot of talk about super yahtzee... I just much rather not think about it and try to ride my streak as long as I can. I know I get into trouble when I start thinking about dollar figures. Tomorrow is Wednesday and I usually doesn't do too well on Wednesdays so let's be careful.

Monday, July 7, 2008

My New Streak?

Trading back at the old desk today since David comes in on Mondays. Frankly, I just feel more relaxed and focused. Relax and focus seem to contradict each other but that's how it is. I'm focused on looking for new trades and I'm relaxed just trying to maximize my profits. I had a pretty nice day, and almost made a new personal daily best.

Banking is still weak, now that FRE and FNM comes out with this FAS 140 news I don't think it's going to get any better. IMB dropped 29% after market (well, it's like 70 cents and it dropped 20 cents so the percentage looks more drammatic). In my long term I've dumped all my longs... don't know if that's smart or not but I'm not going to get long until I find where the money is flowing. I'm short a lot of car makers, airlines, regional banks like ZION, MTB, STI, BBT and all the exchanges like CME, NMX, ICE, and NYX.

My KRE and STI short worked well around the open but it could've been better. This might be one of the places where I should use the wider stop once it's in my favor like Andy said, especially if something is trending very well. I think KRE dropped another point since I got out. I was looking for SPY to break that 126 support today and it happened right around lunch time. I'm glad I was zoned in and decided to skip lunch and shorted bunch of EEM and shorted the bounce with that and EWZ again. I think the plan tomorrow is to see what the market does around this 126 level if it gets back there.

I caught Andy for a few minutes today while he's walking around the office and asked him about Hirschhorn and he said to look for sample journals from him and what I found was the following 15 points, although in certain sites or interviews I've read it's 18... oh well.

1. Establish your trading rules for the day. For example, if you've been struggling lately, you might establish a rule that you'll take 50% off your winners on the first hint of a pullback.

2. Identify the major world events that are currently in play.

3. Figure out which economic numbers are in play today.

4. Create a motto for the day. Keep it brief and positive.

5. Develop your morning game plan (be sure to do so before the open).

6. Evaluate your morning game plan (how did things really play out? How did you react? Did you stick to or stray from your game plan, and why?)

7. Prepare an afternoon game plan (create it over lunch, say, before the afternoon session begins).

8. Evaluate your afternoon game plan. A quick retooling of strategy could pay off in the second half.

9. Ask yourself: What did I do well today? What could I have done better? Use this step to dig deep and engage in some genuinely tough self-analysis.

10. List all your trades that appear to be working and all those that aren't.

11. Call the market -- is it range-bound? Trending? Which sectors are in play?

12. Determine for yourself: On a scale of 1 (low) to 10 (high), your level of focus and concentration for the day.

13. Your daily question: Am I a better trader today than I was yesterday? If so, why? In other words, what exactly have I learned? A day without learning is a wasted day in a trader's career.

14. Which trades should I pay attention to tomorrow?

15. My goal for tomorrow is?

Sunday, July 6, 2008

My Messing with the Streak

"A player on a streak has to respect the streak"
--- Crash, from Bull Durham

Trading certainly has been interesting to finish out the month. The Fed day and the day after resulted in me giving back a good chunk of my month, but then I put together a streak of three really good days, and I mean pretty damn good, at least for me at this point in the game. Then one day Lawrence came over and asked me if I'd like to trade at David's desk since he's going to be gone or trading from home pretty much all summer. Mind you, David's an HP, his computer is a lot better, plus he has four monitors that I can use and on top of that I get to sit between two really good traders. Obviously I like the idea very much, but at the same time I know I'm very much about comfort. It's not that I'm afraid of change, it's just that once I grow accustom to something, anything that's different just kind of throws me off focus and it takes time for me to get use to the new environment. It was like that for me when I play tennis if I used a new string or grip. My focus goes to how this was different compared to before instead of on the game.

Well, the first day I trade at David's desk, his primary monitor is different so I have to turn my head slightly at an angle the whole day. Sure, not a big deal but after a few hours it can create a discomfort. David's keyboard is different and I pressed the limit or market order key intead of loading the price that I want and got some pretty bad fills. David's admin is also different, which is cool that I get to see some other trader's style but I don't get to see what some of the traders that I'm used to. There's also a noticeably increase in cursing on this other side. On my side it's usually pretty quite b/c it's some of the programmers or IT guys' office and occasionaly someone might walk by but holy cow, the amount of cursing that goes on really surprises me.

I had two very very minor down days but I'm taking steps to make everything as close as to the environment that I'm used to trading in, that means making some changes to my layouts and getting rid of distractions. We'll see how this goes, if it really bothers me I might just forgo the two extra monitors and better computer and stick to my own setup.

My Meeting with the Big Kahuna

I had requested a meeting with Andy before he returns back to China. There was so much I could ask him about I didn't know where to start. Unfortunately that morning I needed IT to help me set up some stuff it ate some precious time. Also we spent time talking about my past/path at the beginning, which was nice that the CEO was taking interest in me but again, this takes up time that I'd rather spend trying to get some words of wisdom from him.

One of the biggest take away I got from the hour or so we spent was that Andy said that in his personal traidng he would try to hold on to winners as long as he can until they force him out. I asked him to expand on this and he says that he would basically use a much wider stop once a trade was going in his favor, which makes sense but I know for me that's really hard to do. I hate to see profit unrealized, but at the same time you can tell if something is really week.

We took a look at my growth chart and Andy informed me that to get to the next stage of higher, more consistent profit, you have to lose your fear. After that you'd have to lose your anger to get to the next level, meaning revenge trade and things of that nature. This coincides with the book I'm reading by Mark Douglass about trading in the "zone" where you lose your fear of losing money and instead trading the set ups that work for you and sticking to your stops.

Other than that, Andy just try to encourage me to develop the habits of the best traders have, such as getting in early and be aware of any news that might affect market movements that day, spending an hour a day after trading to review, and spending an hour a week learning new technology and an hour a week talking to other traders. He also encourages me to go back and watch some of the videos we have done with HP traders, which I have since our first casual chat. I watched them all when I first started but maybe they'll have more meaning this time around. There also was a period where I kept strict recording of all my entries and exists, looking at charts and indicators to see if I could've done better but over time I either got lazy or see the diminishing return of the time I spent that I stopped doing it. Andy sent me a template that another trader uses and I think I'll customize it a bit and start using that.

Lastly he left me with the name Hirschhorn before I had to run back to my desk and get ready for the day. I don't really remember what Andy said about him so I just jotted down his name with the intention of googling him later. Apparently he has a nickname as the Trading Dr. Seems quite interesting... I will have to check him out later.

Weekly Watch List 7/7

Last week was a short week due to 4th of July and not a whole lot of earnings or events going on, but this week gets us ready for earning season. On Tuesday we got Alcoa (AA) reporting after the close and Friday we got GE reporting before the open. We also have the Univ. of Michigan Consumer Sentiment coming out on Friday. Too bad I will be gone to Arizona this Friday. It was a hard decision. I haven't taken a break in a while and like I said, earning season was starting soon and it's going to be even harder to get away. S&P is at this critical 126 level and I think we're just about to open the flood gate for another crazy summer. We have seen SPY breach this 126 support level, or the low from January and March. The first time it broke we bounced right back and when it broke again on Thursday you can see a more pronounce selling, even though it's to safe to assume a portion of traders are on early vacation. We're also seeing money flowing out of coal, metal, and some of the energy/gas stocks. The money has got to go somewhere though, could it flow into tech or some of the safer big cap stocks? We'll have to see what this summer brings us.

Thursday, July 3, 2008

My Class So Far

There's so much to talk about, but I suppose I'll start with the quickest one and talk about the Dale Carnegie class, some of the other stuff still require more pondering and thinking.

I'm really enjoying myself with the class. It's great working with Jim. I think I'm still trying to find my place in the class. All the GA's have different styles. Mine is more really just there to listen and only interfere when absolutely necessary. Say for example if someone was dominating the discussion or if anybody hasn't really spoken or made the progress we'd like to see. I get to go through the course with them myself and it's quite refreshing after 6 years. These life principles we teach in the course are so simple but why we simply don't put them into practice in our everyday life and what a difference they make amaze me.

I can already see the impact it's having on some of the people and we've only finished week 2. I want to peg people for what kind of break through or path they'll take through out the class from my experience but after this week and their first talk I have to remind myself that everyone of them is different. They all have a story. Gosh, they seem to be so into it though. The energy is high and they all seem to be eager to share with whatever they're struggling with and the little victories they have.

This is going to be pretty cool, and I get to try to have my own break through as well, even though with this position comes with more reading, lots of prep time and an unfathomably long Wednesday that usually leads to a tiring Thursday morning. To give you an idea, I typically get up a 6am, get to the office about 7:30. On Wednesdays the class starts at 6pm and ends at 9:30, then the GA's and the instructor would meet to prep for the following sessions for about half an hour. By the time I get home it's already 10:30pm and if I'm lucky I get to finish the other stuff that I need to do and my head hits the pillow before midnight.