A Good Imagination and a Pile of Junk

Blog needs a major overhaul.  I really like the bliki idea (blog/wiki) as it seems the only sensible way of automatically cross linking content such that it remains accessible.  This foolishness of blogging being forceably time linear is as stupid as using cassette tapes for music.

It’s time for me to get back into IT.  Trading isn’t working and, more importantly, I don’t really care about it.  At the end of the day, even if I’ve traded remarkably well the only thing that’s different in the world is the size of my trading account and some femto-modifications to the price of certain instruments as an affect of my involvement.  Money is a necessary motivation and I’ve enjoyed tremendously having lots of it in the past but I’ve never been deluded by it’s value into making it my primary motivation. (Actually, that’s not true. There is a time I chose money over enjoying my job, before I’d had any idea what it was like to have money.  I did make the best decision I could have back then.  Frankly it’s only now, 10+ years later that I’m coming to terms with the fact that I can’t reasonably have expected myself to have made any other choice at the time.)

I say “get back into IT” because while I’ve just started up the job search engines, I’m not married to programming.  It seems to me that this would be a really great time to shift gears a bit.

In a perfect world I’d work on small (time) scale assignments in a hired-gun capacity.  Historically I’ve been far too easy to bore in a noncompelling project.  I’d rather come in with a full head of steam and grind for 6-12 months and leave having done a damn good job.

The Agile/XP Coach job was an interesting experiment because it really shined a light on a great deal of untapped potential.  But it was ultimately doomed to failure as a large-scale teaching job.  Piecemeal and small scale classes, training, pairing and tool creation and setup were wonderful.  When it came time to actually fly half way around the world and do 3 weeks of training, I simply wasn’t ready for it and bowed out, which was unabashedly the right thing to do.

No matter where I land, I simply can’t go through a day without making something any more.  Hell, even in my horrible heroin like addiction to MMOs I spend most of my time “crafting.” But I do very well with small scale quick hit tools and programs.  Everything from protocol ‘breakout box’ taps for testing purposes to banged out html screen scrapers and even mini gui apps that help me get through the day.  I churn these things out all the damn time.  Unfortunately I’ve never been quite focused enough with job responsibilities to be a top tier perl or python scripter in a unixen environment, otherwise there’d be that facet open.

For now, my job search is on autopilot, dice, monster, hotjobs, a couple really great recruiters (yes, they’re out there.  There are a couple who didn’t get their job by failing the ethics exam to be used car salesmen.)

I want something a little different though.  Something that plays to my strengths, but seems to me to be a fairly odd niche.

On To!

I’ve got a problem.  When I go back over my trading notes I notice a couple interesting things:

- I’m getting pretty damn good at getting in to a trade.  I have a couple trade setups that I recognize and time very well both to the long and the short side.  In fact, my success ratio is a little bit over 2 to 1 which is exceptional.  My trading is pretty basic still, but for now that’s all it needs to be.

- While I don’t “cut winners short and let losers run” I absoLUTEly “cut winners short.”  While I’ve gotten somewhat better at bearing the necessary drawdowns as things work themselves out I still hop out of trades at the first sign of trouble, once they’ve started working for me.

Again and again I look at notes that say: “jumped out too early”, “damnit it kept going”, “bitched out of the trade” and a couple less complimentary phrases.

I’m entirely frustrated by my lack of exit criteria.  I’m not going to go in to what they are, since this whole thing was just a lead in.

I sat down tonight (having exhibited this exact behavior on my two winning trades today) and collected a bunch of trading books, a notebook and a bunch of 3×5 cards.  I said (out loud actually) “I’m looking to learn one topic, exit criteria of successful trades.”

Then I came over here and opened a blog post.

*bangs head on desk*

Yes yes I know, it’s 12:45 am.
“ah, I should just go to bed so I’m fresh for the morning.”

*twitch*

Alright alright.

Santelli is the most lucid voice on the entire CNBC network. He’s just about the only reason I ever tune in any more. Check this out:

Trader Buzz on the Government’s Plan

(I’d embed the thing but I’m not sure how with that site and I’m disinclined to go spelunking through the html)

UPDATE: Embedded the youtube version.

It’s clearly time again for me to set up a little agent process server machine on my wee little network here.

Watching twitter has caused all kinds of old ideas to re-sprout, and they’re things that would be quite beneficial to my trading as well.

Twitter seems almost like the command line to the internet. There seem to be as many bots out there as there are people. Things that search, reflect, etc. Weirdly coded commands provide a whole metalanguage in twitterland. Fortunately I feel fine getting excited about it because none of it is the slightest bit new.

But I’d love to have something that put a page together with panels of links (ALMOST like frames) as people who I’m following post them. Of course, html frames is a pretty crude way to do it… but it would sure work.

There are the better part of a dozen more of those kicking around inside my brainskull, but that’s the only one I’ll drop for now.

Now I just need to go find my mac mini and bolt it to the backplane under my desk that my cables are all zip-tied to.

l8r o/

Haven’t been shoppin’ but I sure as hell haven’t been around here, as you’ve noticed.

I’m really up against the wall on this grand experiment of mine.  My success is getting to be pretty consistent.  But when push comes to shove I’m not “making my numbers.”  It’s a horrible curse, and I may yet be able to pull this off.  But it would be “pulling this off.”

It’s hard being scared when you go to sleep; worrying about money, worrying about your performance, realizing that the only obstacle is your ability to get out of your own way and do the things you know are right.  Add to that the knowledge that there’s something else you love doing but if seemingly the only way you can do it is if you have to sell a bit of your soul.

If I didn’t hate financial IT so much this wouldn’t even be a discussion.  But I’m near pathological about it now.

The big problem at this point (here comes the justification… wait for it… waaaaiiit….) is that my resume looks less focused than a pollack painting.  I’ve been doing programming work I can’t stand for so long that it’s really crippled my marketing power due to a bad case of ADD job hopper syndrome.

A friend of mine is a recruiter and she just shakes her head in disbelief at my resume.  “Mike, you’re great once you get in front of them.  But how the hell do you expect me to get you in front of them?”  Which is true.  I interview pretty well.  I tech out moderately well for my skill set.  But the recruiter’s got a bitch of a sales job.

Of course when I say “no financial” she damn near hangs up on me.

Yeah so that’s that about all that.

I can’t even describe to you how unbelievably frustrating it is to finally see success coming and realize it might just be too late.

7 consecutive up days at the market.

Yesterday I had an inSANE day. Not an insanely GREAT day mind you. I was up… err… a lot in cash and I made a trade based on a newsletter recommendation (a very good newsletter with a rather remarkable success ratio lately) and the market turned around and that one trade looked to erase more than my gains for the day.

An email alert for the newsletter came out saying “dump it at a loss, this market’s just not letting up.” But by the time I got the email it had already improved a little from that point. So I put a protective order on so that if it got worse it would automatically go, then I struggled to endure massive fluctuations.

That trade ended to the bad, erasing more than half of my gains. But I was able to save a bunch by judicious panic stricken manipulation of my exit point. So THAT I’m pretty chuffed about.

Then today I had a small trade that I called beautifully. It wasn’t a huge gain, but it was quite healthy. My entry point was well reasoned (a relatively new notion in my trading :p) and while my exit was a little frenetic, it obeyed my trading rules which makes it a success. The fact that the issue (Wells Fargo) went the other way as soon as I exited the position had me doing the happy dance for about an hour, feeling very good about myself :)

Ya know, the “most important thing” about trading changes for me every 20 to 30 seconds, as you might imagine. But there are only three things you need to get good at in order to be able to do this successfully:

1. Develop a trade plan: What are you buying and when. Under what conditions are you exiting the trade (to the good and if you’re wrong.)
2. Trade that plan. This is so very very much harder than it sounds. No, there’s not a gun to my head with Halle Berry blowing me but there are a number of things that make it pretty damn tough to concentrate.
3. Change your rules when necessary. “When necessary” is easily defined if you’ve obeyed the first two. It’s when you’ve obeyed the first two, the trade breaks, and there’s a reasonable adjustment that would have prevented it that is reasonable to have seen up front. Look, the WFC trade I mentioned from this morning turned “against me” after I sold…for a little while, then it turned back around and went 3x farther in the direction I had on. But my trade was intended to be a 3-5, maybe 10 minute trade. I wasn’t looking to catch the hour long trend. Maybe I should have. But that’s a different evaluation. I couldn’t reasonably have seen that happening on the time frame I trade. That trade is a different thing altogether. So this was a success.

I have a couple additional rules that keep me as close to sane as I’m likely to get:

Never make the same trade twice in a row.

A successful or failed trade slams me emotionally. I used to succumb to this hideous impulse to either run back and do it again or “get my money back.”  Neither of which are particularly constructive impulses.  My rule forces me to shut down the chart for a ticker that I’ve just traded.  It forces me to step back treat every trade as an individual thing.  This was an incredibly expensive lession.

Decide up front how much draw down you’re going to accept:

This would be nice if I could follow it better than I do.  Let’s say you buy a bunch of FOOBAR at $100 having a well thought out thesis that it’s going to go to $110.  You buy and it hits $99.  RED BAR RED BAR.  You start sweating.  $98… oh crap… maybe I botched this one up… $95.. uhm…uhm… SELL!  Phew, that could’ve been bad…. $98..$99…$100…$102…$106… SHIT SHIT SHIT SHIT SHIT!

I can’t count the number of times I’ve stomped around my apartment screaming on the phone to my endlessly tolerant friend, “BUT I WAS RIGHT!”  As if the market gave a crap.

Things correct, the price moves breathe.  Nothing goes up or down without stopping to ask directions and frequently retracing it’s steps.  Make sure you’re wrong before you decide you’re wrong.  Decide up front how much you’re going to endure.  You can place orders up that will automatically dump the position if it goes too far.  That way you remove emotion from the trigger.  If you were wrong about how much to endure at least you TRADED THE PLAN, and you an adjust your rules and have a better plan next time.  That’s VITAL.

There was more but I’d only intended to have a “woohoo I’m doing good!” post, not an expository blather about trading technique.  Maybe I’ll come back to it.

*shrug*

ooh, shiney!

I had a thought last night which left me with more questions than answers:

The S&P 500 index rebalances semi-anually, and I think tonight is the night it happens.

When the list of what makes up the S&P 500 re-shuffles, the equities that dramatically underperformed the rest of the index will be removed. Now, let’s say a single industry did more poorly than the rest.

The result then is that the sector that underperformed will be correspondingly underrepresented in the S&P.

Given that financials took a dump in 2008 even worse than the rest of the world, they’re going to be pulled out of the S&P in larger measure, right?

Ok. So what is that going to do to the index at large, and what is THAT in turn going to do with reporting on the market?

The performance of the financial industry is going to be increasingly factored out.

Unfortunately I don’t have much in the way of predictions based on this. But I don’t think that financial equities are going to match the rest of the market, so what we’ll end up with is an index that’s a much more accurate representation of what’s going on, which is the point anyway.

I dunno. Just babbling. I’m still rolling this around in my head a bit. But I think there’s something here.

Transparency. We’ve been hearing about the need for transparency in the financial system for months. Between Barney Frank’s bloviatiations (fucking ironic since he’s the chairman of the House Financial Services committee, but I digress), and pundits across the spectrum; from CNBC to FOX.

Even Paulson has come out more than once on the topic.

But they’re not going to do it:

Fed Defies Transparency Aim in Refusal to Disclose

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

Here. We’re going to spend 2 TRILLION dollars of your money. But we’re not going to tell you what we’re going to do with it.

Trust us.

We’re from the government.

We’re here to help you.

It’s insane. inSANE.

I’m narrowing in on the level of trading performance I’ve been looking for and I’m not gonna lie, I’m pretty amazed.

I’ll let you in on a little secret here: Today, not after some $10,000 gain “cover off the ball” trade (like AIG) or some huge currency move; today, after a $120 gain on DIA (which is an index fund measuring 1/10 the Dow Jones Industrial Average) I realized that I’m actually going to make this work. I’m really going to do this and it’s going to work for me.

The market is behaving like a rat in a coffee can (to quote my favorite marketeer Jeff Mackie) and it hasn’t affected me in a material way. Frankly it’s been good for me.

Now, I’d rather it be good than bad because damnit, good is good and the more people that succeed, the better. This ain’t a zero sum game. But frankly, I’ll take market moves over doldrums since that’s how I make money.

Am I going to get rich this way?

Eh, it’s not REALLY the point (well, it’s A point certainly.) The point is that my income is based on my work for the first time… ever. It’s not based on accrued hours spent in a chair. If I succeed, it’s because I SUCCEEDED and for no other reason.

I can do things now like “work really hard in the morning” then take the rest of the day off.

Like, if… oh, y’know…

Fallout 3 is released.

w00t!

:p

I just found out that, although all the language semantics seem to be there, Think Or Swim doesn’t actually support user created program trading strategies.

You can get close. There’s a little programming language and it has an “addOrder” function. But all that does is place an indicator on the chart saying “buy here” (well, it’s a bit more interesting a tag than that, but you get the point.)

I’m getting very far along with a couple automated trading algorithms and it’s pretty frustrating to find out I can’t actually switch them on.

Plus, while they do plan on putting that feature in, it’s months away.

So I’m left with a quandry.

Should I switch platforms? ToS does EVERYTHING really very well. It’s the Grand Unified Trading platform with tremendous depth and breadth. But if I can’t use it to create “the black box” then I may have to let it go.

Either way, it’s time to start evaluating other platforms.

ugh.

I am NOT up today

Fucking NUTS :-)

I’m up $707 on the equity side for the day and about $200 on the FX side.

I’m ordering a large pepperoni and fresh garlic pizza and I’m gonna eat the whole fucking thing.

I’d been happy with my gains and have my laptop open to the market indices just to keep on top of things. So I looked over and the dow was down 740 points.

First and foremost: I don’t know shit about shit.

But here’s what I’m thinking. The actions of the fed this morning on top of the bailout bill on Friday (which seems to have achieved a consensus judgment of “ineffective”) gives ME the impression not that they’re doing whatever needs to be done. It gives me the impression that the governing bodies are in a state of panic.

I’m dying to get in to this, but one thing is that I’m smart enough to know at least that I’m not smart enough to play this day live.

Since I opened this post to start writing (about an hour ago) the dow dropped down to -792 off the day and has come back almost 200 points to -603 (it’s bouncing down off -600 at the moment, 3:12.)

In 10 years I’ll look back and wonder how I didn’t do the magic obvious play. But not today.

And it’s KILLING me :-)

-555 and climbing.

This isn’t a “market” today; it’s Mr. Toad’s Wild Ride.

Which is all fine by me ’cause I’m up about $800 on a half-dozen trades. I’m hanging it up and erasing my brain for an hour or so. Then it’s back to some projects that have been neglected.

I should feel better about this than I do, I know.

So this week I’d been holding a substantial position in AIG.  I appreciate that sounds like utter lunacy to sane people, as it perhaps ought to have for me as well.

It started on Monday with the “AIG won’t be allowed to fail.  It’s tendrils are too wide and deep” thesis, which I hold to.  I scalped $0.25 on 2000 shares at about 3:45, dangerously close to the close, but then the equity price dropped below the initial buy point so I purchased a few thousand to hold overnight.

The idea at that point was that everything was in flux and SOME kind of plan would be announced, most likely overnight and the stock would react accordingly.

Well, nothing happened from Monday to Tuesday.  So I spent all day Tuesday white-knuckled, watching the equity price (having gotten home at 1:30 in the morning and talked to Stevie for something over two hours before bed at 4:30.  Go me!)

The thesis still held even though the need for a deal was merely being talked about fast and furious, so I put on another 2000 shares in the morning, then it fell like a stone.  I was down several thousand dollars and I set about trading it back.

I succeeded wildly, making about $7,000 by scalping nickle/dime and quarter moves on 2000 to 4000 share lot sizes all day.  By midday I was up a couple thousand dollars.  But the more I looked at it the more the overall thesis made sense, so I held the position.

After hours the deal is announced and I watch the extended-hours action white-knuckled, as the days gains largely evaporated.

Enter Wednesday morning and it took another hit, leaving me net down about $6,000.

Mostly on Wednesday and Thursday I just stared at the screen.  But it had clearly bottomed out.  The price was remaining fast at above $2 despite the market pressure, which can only be a good sign.

Then last night was all the foolishness announced creating the heroin hit for the market started sending things up in late action.

From 4:00 this morning I’d been watching the price of AIG raise.  I missed the biggest spike, but took 4000 shares off at $4.17; a move that seemed smarter and smarter over time.

Worn out I watched it plummet today back down to $2.50, and start to spike up.  Not having the faintest idea what was going to happen (though believing the long-term idea still held) I backed the rest of my position out at about $3.15.

It leaves me up about $9000 for the week; a price level it held for about 3 hours.

Until a few minutes ago, when it shot up to $4, which would’ve nearly doubled my gains.

But the attitude that would’ve been required to hold the equity to that spike would have also required the “wait and see” attitude that would’ve watched the subsequent slow downward slide that’s beginning.

So I took the money off the table in the face of uncertainty which, despite the equity performance since then was the right thing to do.

I don’t feel particularly successful about the move with a couple exceptions:

• Trading back from the first substantial loss on Tuesday was a wild success.  Not a perfect one, but scalping very quickly was working quite well.
• The original idea held true.  Of course it wasn’t MY idea, which is where a lot of nail-biting came from.  Not that I disagreed with it.  I wouldn’t have bet the farm on it if I thought it was a long-shot.  But I’m a day trader and anyone who knows me knows that having to sit and watch the ebb and flow of something for days instead of seconds to watch a long-term trading thesis to be borne out knows it would drive me quite batshit.  But it was right and I took their money off the table because of it.

But instead of a successful trade, this feels like a reprieve.  I’m not up more than I’d been down by about $1,000.

I’ve gotten my mulligan.  Now I just have to figure out what to do with it.

This bailout of the entire stock market is a fucking travesty. The dow is up over 400 points before 25 minutes of trading has completed.

Yes, the bad debt needed to come off the books. But I have a hard time believing that having the taxpayers foot the bill for the missteps of congressional policy and years of indiscriminate, inappropriate lending is the right solution.

Then there’s the prevention of short selling on the banks for the next 3 weeks serves only the purpose of boosting the confidence artificially for the next three weeks.

If the momentum of this move doesn’t infuse the market as a whole with real, substantial confidence then on October 2, when this prevention of shorts on bank stocks expires, the world is going to fall off a fucking cliff.

This isn’t a cure for cancer.

It’s a heroin overdose.

My target trade gross profit is $200. That’s a 2000 share lot size taking a dime off the table.

I just made a trade, took $0.15 per share on a 2k lot, grossing me at $300 to the good.

And it was a really shitty trade. I should’ve taken my dime and walked away.

Record up day yesterday.

Record down day today.

Chinese food I guess.

o/

What would be exceptionally helpful is if ThinkOrSwim’s software platform operated natively in a Linux environment.

I’m just sayin’.

It would make my life markedly easier.

Highest gain day ever.

Electronic Arts (ERTS) I took them for a few short positions.

And let’s see…what was that other one… hmm… some money housy thingie.

Oh right, Freddie Mac :)

Nabbed 10% on them within about 10 minutes this morning. Wasn’t a huge stake, but it was big enough to make it my biggest day.

Tomorrow I’m going to The Last HOPE.