I always anticipate the breakout. In a choppy market it is essential to buy from dips/consolidations, with proper tape reading you sacrifice some in probability but more than make it up with a super tight stop that comes with a great entry. As a matter of fact I usually pare out at least half of my position on breakout's, as most do fail on those days. When I say XBD breakout I mean I am already in and it broke out, not that I bought something in reaction to the breakout.
I am going to have my hands full with the upcoming months. Every time I talk to my boss, I learn something new. The man is absolutely amazing in his intensity and is razor sharp when it comes to negotiations, perhaps even more important is his tremendous people skills, he knows exactly how to push buttons and install respect/awe in your heart at same time. For example, he asked me how old I am, and I told him 22, and he immediately said that I look older (28-29ish), and I have an incredible career in front of me. Compliments cost you nothing, yet extremely useful in winning over other people's heart. Proper use of compliments however is absolutely essential, as he definitely hit me in the soft spot with that one, as one of my biggest assets is youth, and one of my greatest obstacles is age. It was a very effective compliment. I remember when he interviews younger guys he tend to talk about buying their girl friend diamond bracelets, and when he interview Asian guys it is usually make your mother proud. There are so much I can learn from him. There were a few issues I discussed with him today. The team I recruited from a competing firm is filing a law suit against them, sour grapes happen all the times in this business and our firm has some of the best lawyers in this business. It is most likely nothing more than a scare tactic, and my boss assured me that if it comes down to it he will pay it off, I was assured that I can let my guys trade with 100% confidence that someone has their back. My contract will most likely go into full effect on January 1st, 2002. He said he wants two weeks to make sure that everything is under control as he does not want to compromise my position as a team leader right off the bat just in case. That said, he gave me the go-ahead signal to be absolutely relentless with recruiting. He gave me the power to basically outgun anybody on the street when it comes down to commission rates and payouts, simply because we self-clear. He even told me to continue to attack the firm we recruited that team from, and I explained to him that with the current tension it is best to stay clear. He told me that if I come across anyone from that firm, give him the number, he will do the recruiting and put the person on my team. The way I see it, there are three types of traders in this industry. On one end of the spectrum, there are people who make massive sizes at every firm, and they are probably happy for the most part, barring some unforeseen scenarios, it is almost impossible to recruit a super star performer when he is red hot, you may catch him if he is on a losing streak, but the risk is of course he blows up in your face. There are also the fresh blood's, with very little capital and zero track record besides a Datek account statement, and it is almost guaranteed that they will lose some of your money before taking off, that is, IF they take off. You try to minimize the initial damage by having them trading 100 shares until they get to an acceptable level of performance. However, people who are willing to get a shot in this business without starting capital are a dime a dozen, and you really need to talk to them to separate dreamers and believers. For a firm's (and in my case, a trading team for that matter) longer term success, I am convinced that you have to give everyone a fair chance. My boss told me he wants well educated people (Ivy Leaguers, like her prince, my arch rival), here his people skill fell short a little bit as he forgot that I am a college dropout myself. I personally have a totally different set of criterias about who to hire. I want people who literally have no life and totally obsessed with the stock market in general, people who would spend hours after the close whether they had their best day or worst day. Most importantly, I am looking for people who came from blue collar families, so they have a sense of urgency, an instinct that reminds them that this is their best possible opportunity, if not the only opportunity, to make it big time. A silver spoon Ivy Leaguer (her prince), and a hungry college dropout with nothing to lose (me), I would (well I hope I am right in this specific match-up) put the money on the farmer boy over the prince every time. If you can control your losses, it comes down to who wants it more. The third and last type of traders, is the type of trader everyone and their mother want. You have some guy who has been trading for a few months, he is about to break even, he is generating decent commissions, he is conservative and doesn't go crazy with size. He is probably at another firm, and not happy with his commission rates / payout. We can talk about atmosphere, training, team environment, software, and equipment all we want, but in the end, it is what you offer to a trader's bottomline that is most important. Like the way we buy a stock right before a breakout, every single firm is after traders who are close to a breakout. This is the tier that has most movements, the bloody battleground between recruiters. Quite simply, it is wonderful to let some other firm take the damage of the learning curve and you grab him as he starts to produce. Every firm wants to do this, every firm try not to let it happen too often, and it is an all out war. Fortunately, with the type of rates that I am allowed to give out, combined with the fact that no other firm can start their traders with less capital than we require, I am very confident that I will smack down a lot of competition and break a lot of legs. I have three friends at work that I wanted to bring onto my team. One is M, I have been trading with for six months, and we developed great chemistry. He just turned positive (read: like a stock that went down and just broke the high of the day, completing the "U" shape). Another is S, someone who is down nearly 9K (most in commissions) but seems to have consolidated into a potential bottom. Both M and S are good friends of my age, and I would have loved to have them on board. My boss didn't want to give them to me, simply because he wants me to stay hungry and aggressive, and go attack other sources, which I totally understand. However, Mrs D started her group with 4 people from our own firm, and two of them were steady performers already making a living (I know because I was one of them). Compared to M and S, it seems double standard that my boss is not cutting me any slacks, especially given the fact that I have been doing a solid job recruiting, and Mrs D have brought in only one guy since the inception of her group. Obviously, with the distasteful comments she threw my way, I am out to build a far superior team that will make her look like a joke, I am getting warmed up with the new recruits, but I would still like M, who is like a brother to me over the past six months and he really wants to be on my team. I know the boss doesn't want me to create competitions and start to recruit every free agent from within our own firm, but I gotta let M talk to him tommorrow, as we have truly developed our game together. The trader I did get the approval for, is in his own words, someone nobody else wants. He is what you would call, a senior citizen who took part in a young man's game and is getting nowhere. An ex-broker with tremendous wisdom in just about everything in life, knows literally every stock, every indicator, spends 12 hours a day at our firm, the fatal wound is his inability to take shots. He has been trading for close to a year, and only avearges 2000 shares a day each way. He is down 13K after commissions, only a few K before. Why did I say yes? Because being a good leader is more than just making profit off your guys, there is something called friendship that is far more important than money. I remember what he did for me in the past, telling me that I am going to make it during the summer losing streaks, telling me that I still have a chance when the princess reunited with her prince, and telling me that I am indeed good enough to excel in my current position when I had doubts about my age and lack of experience. He was there for me when I needed him, and now is my turn to give him my 100% effort, to at least try to make something happen. He is running out of time, within the next 3 months I must make a serious impact in him, a herculean task, but like pursuing the princess, not everything is like a stock trade, there are many low probability trades we take in life, not because it benefits us, but it is because it is the right thing to do. And in this case, I owe him, my 100% effort to make him a better trader, and he shall have it now. Will it help? Even he would admit it, probably not, but he is a great book if you can get past the old dusty cover, and something tells me that he will give it all his got. P.S. Given the heated recruiting battles, it is no wonder that many firms are adopting "golden cuff" policies. My firm has none, and that's called confidence in our rates.
Hitman: From your experience in sector trading, if the futures are in a downtrend and the sector index is in a downtrend (or just broke through support), and there is a tier 2/3 stock that has had unusual strength, do you find that it is a higher percentage play that the stock will eventually yield to pressure from the index and fall or is it generally better to wait for a bounce or reversal in the market/index and then buy the outstanding tier 2/3 stock that has been strong throughout (assuming that the tape does not suggest anything too significant in either direction)? In the situation stated above, would it generally be better to not short the best performing tier 2/3 stock in the falling index but rather the 3rd or 4th strongest (ie - one that hasn't collapsed but is not in an uptrend)? (Again, assuming there is nothing on the tape that points to the contrary) Thanks. DeeMan
I play a lot of laggers, so if the futures and sector just broke a support level I would definitely go short on stocks that haven't moved. However, when I say "break support", I mean it just broke the support, not an extended move that broke support after some already serious tankage. I always start short positions from consolidations and squeezes, simply because you can not afford to be wrong when you play breakout's.
I thought I might toss in a couple of notes about sector trading. We focus on the actual group rather than the overall index, becoming aware of the leaders and the laggers (as Hitman said), and when the market is running up, we simply watch the stocks that cannot rally (but haven't fallen yet, because the market is up), and short the heck out of them. If they can't rally with the sector, then when the overall market and the sector retreats they lead the charge down. This simple strategy has worked for decades....
Yes, I gotta agree with Don on that... it is a classic relative strength play, as applied to sector trading. A layer of probability enhancement can be added by focusing on the non-movers in the strongest sectors.
"A silver spoon Ivy Leaguer (her prince), and a hungry college dropout with nothing to lose (me), I would (well I hope I am right in this specific match-up) put the money on the farmer boy over the prince every time. If you can control your losses, it comes down to who wants it more." I know everyone's entitled to their own view on life and other people...so here's mine. I went to an Ivy League school and was in no way born with a silver spoon in my mouth (born and raised in the Bronx in a 2 bedroom apartment with 3 other siblings). My parents never went to college. I got into and graduated from Harvard because I worked my ass off and simply...I just really wanted it. I really don't see my fortunate education as any sort of free ride or birth right. From my exposure in the trading world (including several years as a bond trader at Merrill), I've noticed that fellow Ivy League traders are the most competitive hardcore people I know and tend to have a higher rate of success in the industry than others. I don't want to come off as a snob but just wanted to throw in another perspective. Trust me, like you, we're hungry...really really hungry to out-do everyone on the face of the earth.
someone who is dirt poor, extremly hungry and passionate about life and I will show you a million dollar trader. Well said Hitman. Ivyleague, Doesn't matter if you graduated from Cambridge, you have to want it more than 99% of the people in the world to be a great trader. Make the impossible your dream!!
A solid game as I took advantage of the morning rally. 6 of 12 shooting on 7300 shares each way, +1266 before commissions, +1095 after. I did a decent job avoiding afternoon churning and only gave back $70. With this win I am within $100 of my year ending goal of 70K, while it is the lower end of my projected finish, the year is not over yet, and hopefully I can add a few more K before it is over, and start off 2002 in best possible game shape. Pre-Market: DD upgraded, strong housing data plus positive earnings made me thinking home builders, but a look at the daily chart of those stocks it seemed like a potential gap and trap. 9:30: DD opened up big on high volume and took APD for a 80 cents move (left 40 cents on the table, missed PX and others). Most home builders gapped up a lot so took SPF/MHO, scored 40 cents on SPF and 20 cents on MHO. Took some PPG off the first print and he stopped me out for a 10 cents loss before taking higher. Had FMC at 54.85 and he stopped me out of half of my position before ticking it higher, made 65 cents on rest of my shares and missed a big move upward (I thought he had no gas left in him when Dow fell off 10K twice in a row, I guess in a lower tier stock it doesn't matter). 9:54: Took TRW and out for flat, forgot that autoparts were downgraded. Scored half a point on WFT on OSX move. Tried to get TOL hoping for a home builder bounce but got in too early and stopped out for flat. Choppy market and I stayed away. 3:25: ABV gapped down half a point and I tried to bottom pick, got a bad fill (stupid, never market on those things) and I was out 10 cents. Tried CRA/DNA on BTK move but they ran out of juice, lost 10 cents in CRA and flat in DNA. Did score 15 cents on YRK with SK's filter so I am glad I didn't gave back too much. On a side note everyone on my team finally got the software they wanted in the first place, we had some licensing issues but with that out of the way this should be one effective squad.