Trading is hard, there I said it.
The markets are very humbling at times. In fact there have been streaks in my trading career where I couldn't buy a winning trade. No matter whether I went with the trend or bucked the trend, as soon as I placed an entry into the market I was a loser in an instant. It almost seems that the market is waiting for me to make a decision and as soon as I enter the market a secret signal is sounded to the trading gods, the message is lets screw with Dave's head.
These streaks are brutal to ones psyche. It is very easy at these points to take a bad situation and make it career ending. While I haven't lost my career during a losing cycle I have made some tremendous trading mistakes that have financially set me back. What is worse than the lose of money is the loss of confidence. As a trader our biggest asset as well as our biggest liability is our brain. In order to trade you must make decisions and ones confidence in themselves as paramount. If you doubt yourself or become timid when a good opportunity comes around you will do damage to your profitability as well as your level of confidence in your decision process.
So during one of these cycles I decided to try something radical, and that was to borrow something from the Seinfeld show. I used the George Costanza rules for trading to guide me out of this trading rut. For those who don't remember the episode where this rule came from, here is a brief synopsis. George decided that he was a loser in all aspects of his life. He wanted a better job, a prettier girlfriend, he said every decision he had made through out his life was the opposite of what it should have been. So to change his situation he was going to go against all his natural instincts.The results were life changing for George, he got that prettier girlfriend and landed his dream job.
If it worked for George why wouldn't it work for me. The joke is at first this plan worked, I suddenly started my next few trades with a profit and closed them out as a winner. I jumped from market to market and kept winning. Then I started to think again, and the streak ended.
Using the Costanza approach didn't help my confidence level one iota, in fact harmed it more. But there was a positive that came out of my trial. The trial made me look at my game plan, and whether I was executing that plan effectively. It turns out I was trading like a junkie. I was trading so often that I never really had a game plan and I was trading emotionally. I was trading my P&L and not the actual trade and was trading irrationally . In further blogs I will discuss the above common trading pitfalls and many more I have seen executed by myself or the 100 plus traders I have backed.
Happy and healthy New Year to all
The Evolving Trader
Thursday, December 30, 2010
Wednesday, December 29, 2010
Edge
What is edge? If you are a trader than you have heard countless times you need edge. If you new to the world of trading or have never traded here is a brief description.
Edge is the advantage that you as a trader have on the rest of the trading world. Edge is executing your game plan and profiting in your own special way. As I like to say there are thousands of ways to trade wrong but only one way to trade right and that is to be profitable.
So now comes the million dollar question. What is my edge? I can tell you from my own experience that I have exploited many different edges through out my career. I am going to start with my first and work my way to the current method. When I first started out as a trader at the CME I had just one edge and that was to never trade unless I was virtually guaranteed a profit. This is how it worked.
When I started out at the CME, there was a new product at the time in the currency quadrant, it was the Australian Dollar. To be precise the product was available to trade for a year or so before I got there, but no one could make any money in the pit because there was not enough volume to keep traders attention. The only people really trading the product at the time were position traders and no locals could figure out a way to how to make any money making a market for the opposing position takers. My father somehow figured out an edge to trade the Aussie. He started a arbitrage between the futures on the Australian Dollar and the cash market in the interbank market. An arbitrage is the simultaneous purchase and sale of exact or similar markets in at least two markets to exploit mispricing in one of the said markets. This arbitrage was our edge.
In future posts I will expand on my edges I have used thru out my career.
Edge is the advantage that you as a trader have on the rest of the trading world. Edge is executing your game plan and profiting in your own special way. As I like to say there are thousands of ways to trade wrong but only one way to trade right and that is to be profitable.
So now comes the million dollar question. What is my edge? I can tell you from my own experience that I have exploited many different edges through out my career. I am going to start with my first and work my way to the current method. When I first started out as a trader at the CME I had just one edge and that was to never trade unless I was virtually guaranteed a profit. This is how it worked.
When I started out at the CME, there was a new product at the time in the currency quadrant, it was the Australian Dollar. To be precise the product was available to trade for a year or so before I got there, but no one could make any money in the pit because there was not enough volume to keep traders attention. The only people really trading the product at the time were position traders and no locals could figure out a way to how to make any money making a market for the opposing position takers. My father somehow figured out an edge to trade the Aussie. He started a arbitrage between the futures on the Australian Dollar and the cash market in the interbank market. An arbitrage is the simultaneous purchase and sale of exact or similar markets in at least two markets to exploit mispricing in one of the said markets. This arbitrage was our edge.
In future posts I will expand on my edges I have used thru out my career.
Thursday, December 23, 2010
Goals
Now that you know a little about me, I want to layout what going to be covered by this blog.
1. Show the transitions of my trading career, from floor trader to screen trader.
2. Market observations
3. Trading psychology
4. Technical analysis
5. Current event observations
Those are my starting intentions with writing this blog. As with all things in life I may move off topic on occasions. I promise I will quickly return to the trading arena because of my passion for talking about the markets. I never tire of studying the markets as well as improving my personal trading. I believe that writing this blog will allow me to quantify my own trading as well as help others in their own pursuits of a successful trading career.
1. Show the transitions of my trading career, from floor trader to screen trader.
2. Market observations
3. Trading psychology
4. Technical analysis
5. Current event observations
Those are my starting intentions with writing this blog. As with all things in life I may move off topic on occasions. I promise I will quickly return to the trading arena because of my passion for talking about the markets. I never tire of studying the markets as well as improving my personal trading. I believe that writing this blog will allow me to quantify my own trading as well as help others in their own pursuits of a successful trading career.
Wednesday, December 22, 2010
The Evolving Trader
My name is David Spiwak and I am the Evolving Trader. I am a second generational trader, that has seen the ups and the downs of this industry. My history in trading has been a blessing and a curse, but I love trading. The reason I love trading and investing is because everyday you need to build on your previous experience to succeed in a world that never rests.
My whole life I have been connected to the Chicago Mercantile Exchange. My father was an attorney in 1970, and had just moved to the suburbs of Chicago and got on a train one day and his life changed. On the train he had an encounter with a gentleman who leaned into him and said these words, "there is a shortage of eggs". The man introduced himself as a neighbor and a trader and somehow convinced my father to give him some money to invest. A couple of weeks went by and the man gave my father back his money and had doubled it in a few weeks. So my father says "so you say there are no eggs." He decided to leave the law field and came down to the exchange and became a local at the CME. That same year I was born.
As a kid everyone around me was connected to the exchange. Most of our family's friends as well as neighbors were traders, and times were good. At that time trading was much friendlier than it is today. The guy next to you in the pit was a not your enemy and you never wished him misfortune. Odds were if he was making money than it meant you were making money. All around me was incredible wealth, and everyone had wads of cash. As a seven year old in 1977, I used to come downtown and spend the day with my father. As a kid that meant either sitting in an office and watching tickers with numbers zooming by me or sitting in the exchange's visitors gallery. The gallery was fascinating, as I looked out I saw hundreds of people in bright colored coats screaming and waving at each other and the quote boards on the walls were flickering numbers with mind blogging fast frequency. I watched and watched and I became hooked on the excitement in front of my eyes.
As the years went by my knowledge of the industry grew and I witnessed first hand the ups and downs of trading thru my father's career. I saw that the industry was not all fun and games and trading was becoming more and more competitive. I saw the same people who were walking around with wads of cash in their pockets lose everything. I saw marriages and life's destroyed because of trading but the quote boards kept changing.
Flash forwarded to 1989, I was a college freshman majoring in Radio/TV and I was home for the summer. I got a job working for a DJ company at night but my days were free so my father asked me if I wanted to clerk for him at the CME. My father as well as my uncle were down on the floor and had been telling me that trading at the CME was over. They said the industry was too competitive and was facing its demise. There was going to be other exchanges stealing the business and there was rumors of trading going electronic. They both said have a nice summer but look for a career away from trading.
I walked onto the floor for the first time as an adult and felt the rush of the floor. All around me was a mass of bodies and incredible noise. In all the chaos in front of me people seemed to be in control and where all performing jobs and none of the craziness seemed to be effecting them at all. I was hooked
My whole life I have been connected to the Chicago Mercantile Exchange. My father was an attorney in 1970, and had just moved to the suburbs of Chicago and got on a train one day and his life changed. On the train he had an encounter with a gentleman who leaned into him and said these words, "there is a shortage of eggs". The man introduced himself as a neighbor and a trader and somehow convinced my father to give him some money to invest. A couple of weeks went by and the man gave my father back his money and had doubled it in a few weeks. So my father says "so you say there are no eggs." He decided to leave the law field and came down to the exchange and became a local at the CME. That same year I was born.
As a kid everyone around me was connected to the exchange. Most of our family's friends as well as neighbors were traders, and times were good. At that time trading was much friendlier than it is today. The guy next to you in the pit was a not your enemy and you never wished him misfortune. Odds were if he was making money than it meant you were making money. All around me was incredible wealth, and everyone had wads of cash. As a seven year old in 1977, I used to come downtown and spend the day with my father. As a kid that meant either sitting in an office and watching tickers with numbers zooming by me or sitting in the exchange's visitors gallery. The gallery was fascinating, as I looked out I saw hundreds of people in bright colored coats screaming and waving at each other and the quote boards on the walls were flickering numbers with mind blogging fast frequency. I watched and watched and I became hooked on the excitement in front of my eyes.
As the years went by my knowledge of the industry grew and I witnessed first hand the ups and downs of trading thru my father's career. I saw that the industry was not all fun and games and trading was becoming more and more competitive. I saw the same people who were walking around with wads of cash in their pockets lose everything. I saw marriages and life's destroyed because of trading but the quote boards kept changing.
Flash forwarded to 1989, I was a college freshman majoring in Radio/TV and I was home for the summer. I got a job working for a DJ company at night but my days were free so my father asked me if I wanted to clerk for him at the CME. My father as well as my uncle were down on the floor and had been telling me that trading at the CME was over. They said the industry was too competitive and was facing its demise. There was going to be other exchanges stealing the business and there was rumors of trading going electronic. They both said have a nice summer but look for a career away from trading.
I walked onto the floor for the first time as an adult and felt the rush of the floor. All around me was a mass of bodies and incredible noise. In all the chaos in front of me people seemed to be in control and where all performing jobs and none of the craziness seemed to be effecting them at all. I was hooked
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