So Cal Prop Trader

Discussion in 'Journals' started by ksmetana, Mar 25, 2011.

  1. Hello, my name is Kurt Smetana, I have decided to start a journal on here.
    I am an equities prop trader in Los Angeles, CA. I trade in an office. I do not hold overnight positions.
    I am 26 years old, and I have my B.A. Anthropology from University of California, Irvine.
    I went live the last week of October 2010.

    I will begin the journal on Monday, March 28.
    Unlike everyone else here, I have no problem posting my orders. In fact, I want to.
    The goal of my journal is to help me prevent over-trading.
    Knowing that my trades will be reviewed by others will put a little more pressure on my decision making. It will get me to think, "If I saw this on some other guy's journal I'd be laughing."

    I do not stick with one particular strategy. I go wherever the action is.
    Earnings, News, Stocks moving on volume, etc. I'll play pullbacks, breakouts, etc etc. I do not limit what I trade. I am an opportunist. I rely heavily on the level 2.

    Every day I will post my trades, a short commentary on the market and my trades, my day's P&L, and my month's P&L. Every month I will update my year's P&L. If I do not post on a particular day, it will mean I did not trade that day.

    I should also note, I work 7 days a week. I don't get days off. I work a second job to support my trading. I'm not some rich kid playing around. I am building what I have from the ground up. 3 out of 5 trading days I work both jobs. My life is pure stress. It is absolute hell, but that is masculine and there will be no greater feeling in the end.

    Since I began trading my gross P&L is about +$2300, my net P&L is about -$1100. My mock stock and options portfolios do great. Finding the right stocks is not my problem. I live in the markets, I know all the stories, I have tons of trading ideas. I suffer in trade execution. I have a lot of psychological demons I am trying to conquer. I have the typical problems people face early in trading. I get jigged out, I take profits too quickly. Another trader takes over once I am in a position. It is absolutely remarkable what I do to myself. I let my P&L get to my head.

    That all being said, it could be worse, I could be gross negative. I need to get more out of my winners and produce less small losers in order to beat my costs of trading. I am hoping that a public journal will help with my patience and selectivity.

    I welcome all comments, positive or negative. I also welcome trolling. It will be fun to read everything in a year.


    Greetings Kurt,

    Your candor is truly noteworthy. But from the brief information you've provided, in addition to your trading intentions, one has a hard time determining if you are serious about professional trading, or just temporarily in it for the "rush", or entertainment value.

    You have a background in Anthropology, and I think you need to apply some of your skills in that area, and study some of the "humankind characteristics" and "beliefs" of the many failed traders listed here in the archives. I believe that in no time, you will find very many similarities to what you are about to unadvisedly attempt.

    You have already unwittingly stacked the deck against yourself before you have begun. You are entering into this trading arena trying to see if you can consistently win, and you've already lost. As Sun Tzu said in the Art of War:

    "The battle is won before the battle has begun"

    The professional trader isn't guessing as to whether he/she is going to win before they start, as you are. They already "know" that they have a proven winning strategy and plan in place. And that all they need do is to flawlessly execute that plan.

    "Rinse and repeat, rinse and repeat,...rinse and repeat"

    From your going in conditions, your end result is not a question of probability,... its a guarantee. You will fail on this current path. Admittedly, you have been very "lucky" thus far. However, since you're now playing for the long haul, its simply just a matter of time before the inevitable "Laws of Probability" catch up with your account balance.

    Without being armed with a proven winning strategy/plan, how could you possibly replicate your wins, or understand your losses? With your stated "random" plans, you will be trading randomly! Random trading, random results! Can you not logically deduce that "A" is "A"? Therefore, how could your results be anything else? Further, how can you pay your rent with those kind of results my friend?

    I seriously suggest you revise your plans and come back when you are properly prepared to win,....and not just play games with yourself, and your money. You appear to be an intelligent young man. So please, take it from a one time butthead, who is now older and wiser, you are about to make a very foolish choice. You say that you "live the markets" and you "know all the stories". If so, then why have you failed to learn the invaluable historical lessons therein? You need to redirect your youthful vision and enthusiam onto a more profitable path.

    "There are none so blind as those who have eyes, yet have failed to see".

    If you think your college degree was expensive, friend, have no idea of the costs, financial and otherwise, that could be awaiting you, with the game you're about to play at.

    Please, regroup, reconsider, and come back when you know you have a viable plan/strategy that places the odds in your favor to win. You appear to have the requisite necessary intelligence, lets put a cap on that "drug of youthful enthusiam" for the time being, and use that energy wisely and profitably.

    "A dollar is a terrible thing to waste"

    Just my opinion
  3. Thank you for your comment. I am not in this for the rush. As soon as I first got a glimpse into the markets, I knew it was for me. It is the perfect arena to apply my anthropological background. This is the career I have chosen, I want to spend the rest of my life studying price behavior in the markets.

    I came into this knowing there would be a cost of learning.

    You are absolutely right. A tested trading plan gives a trader the confidence necessary to see their plan through. However, in order to devise a successful trading plan, I feel you need experience.
    Quite frankly, if I could do it all over again, I WOULD backtest a strategy and THEN enter the markets. I am completely in your camp. However, I now have the experience to understand what REALLY makes a high probability play. I have bought my strategies through market experience. Now it is a matter of trusting myself and following through.

    When I say opportunist, I mean, how many people have good market statistics on a nuclear crisis in Japan? No one. It takes a human (or an advanced computer) to read the tape and trade CCJ in the following days.

    You have your playbook trades, and then your opportunist trades.

    Either way, you are right, and I encourage any new traders reading this to start on a demo account and do not go live until you are profitable.


    Greetings Again Kurt,

    Kurt, I don’t believe you have a full and comprehensive grasp of the magnitude of the implications of my words to you and to your fastly approaching trading plans.

    First, a true professional does not bring an unverified and non-validated plan to the market to gain valuable experience using real dollars. This is because he has already gained valuable experience on the verified and validated plan, before he brought it to the live market. That is what testing is supposed to do. You have got your cart before your horse. This is not the way the game is properly played my friend.

    Now some would argue that for the discretionary trader, sim-testing is a waste of time because you don't have any emotions on the line. However, I would argue, that if you as a professional have any emotions on the line while the game is being played, you are not in the best state of mind that is required to win the game. That is a fact.

    And, you have emotional issues that need to be addressed before you can realistically play to win. You are not thinking in probabilities, and therefore, not in the appropriate winning state of mind. A thorough and complete,....checkup from the neck up, therefore is required.

    Second, by your own willful admission, you have a constantly changing variable mix of strategies that you will be trading at any one time during the day. In your own words; “where the action is”.

    ("Earnings, News, Stocks moving on volume, etc. I'll play pullbacks, breakouts, etc etc. I do not limit what I trade. I am an opportunist. I rely heavily on the level 2.")

    Some of the strategies you listed are inherently random by nature. But some of these individual strategies have their own unique efficacy, expectancy, risk control, and associated money management criteria. And these things are an absolute necessity, and should be optimally set, in order for each of these individual strategies to be effective and profitable. That is a fact.

    In a lightning fast dynamic market environment, and in a very sober practical sense, how could you realistically propose to maintain discretionary cognizance, over a constantly changing variable mix of strategies, and consistently estimate accurate cumulative expectancies, throughout the trading day. Remembering that each strategy in the mix is carrying its own specific set of functional criteria, critical for consistent successful implementation.

    And further, how do you propose to maintain the overall positive expectancy, of your combined strategies, and yet simultaneously, change the set of variables at any given time?

    In my military mind, you are attempting to hit a moving target, from a moving platform, with an ever-changing weapon, under ever changing conditions. There isn’t a discretionary computer on the planet that can accurately and consistently do this as yet. And my friend, neither can the one that sits on your shoulders.

    The end result, since the "real working numbers" will be a mystery to you during the day, you will be trading randomly, you will have no choice. You will be trading randomly, and your results over time will be random. Again, "A" is "A".

    Self trust and personal follow through have very little to do with playing a game that one cannot logically and mathematically be expected to win. It is just wishful and hopeful thinking. These things have no place in the professional market environment.

    I repeat, please, regroup, reconsider, and come back when you know you have a viable plan/strategy that places the odds in your favor to win.

    I am sorry to rain on your parade.

    But again, it's just my opinion,.....and you did asked for opinions.
  5. Kurt,

    Good luck to you. I remember the days when I first started and I had a customer service night job that I had to work everyday after getting my ass handed to me in the markets. It's the worst. But it's great motivation to learn what is necessary to win. It served as even greater motivation for me to actually do those things. Congratulations on being gross positive after about 5 means you're getting close!

    KDASFTG has some good points that I think that you should take into account. It's great that you're open to trading anything that makes sense at the time no matter if its a news play, breakout/breakdown, fade, etc...BUT it's in your best interest at this early stage in your career to learn how to be really good at one thing --> then once you master that one strat you can move on to learning another strat while making money in your other strat. Understand? By focusing on all those different strats right now you run the risk of being mediocre at a bunch of different strategies but not great at any strategy. Just my .02. Good luck to you.
  6. Same here ElecEquity, customer service....

    How long did it take you to become profitable enough to quit your job??
  7. Maverick74


    Kurt, just curious which firm you are at?

    Also, if I can give you some advice. You mentioned you are going throw everything including the kitchen sink at the market with every strategy type known to man. I also think this is a mistake, especially for newbies. At the very beginning, I think you need to pick one strategy, one setup and learn to master it. The reason being is that it will be much easier for you to grade yourself and identify what you are doing wrong. When you have too many moving parts, at the end of the day, it's going to be very difficult to identify exactly what went wrong and how to change it. When you have one strategy that you do over and over again, it will be the opposite. It will be very easy to see what you are doing wrong and how you should fix it.

    If you can't master one strategy, you won't be able to master 5. Keep it simple. Trading is actually one of the easier things you can do in life. The complications come from the complexity that we add to it, not the market. Good luck Kurt.
  8. It's complicated. After my first 6 months I became net positive and I quit my job. BUT about 4 days after quitting, I had a large losing week and luckily I had a little money saved to hold me over the month it took me to make back what I lost. Actually, I was down to my last few hundred bucks and by the grace of God I pulled out of that hole before being forced to reapply for the job I had quit a month earlier. My first check was a whole $250 bucks! That was in 2007. I still have that check.
  9. I need to quit with the complexities myself. The more that I micromanage --- the less it helps.
  10. Well, thanks for all your input guys. I do agree with you.

    I do need to slow things down and simplify my trading. By trading all sorts of plays I have gotten to see a lot of situations, which I think is a good thing.

    I was doing very well during the peak of earnings season. I back tested setups by hand involving earnings and became extremely confident. I produced my best days and weeks during that time, because I had the confidence required to see my trades through. Ever since earnings died down my trading has been weaker.

    When the quake struck Japan, I spent hours and hours coming up with potential plays. I set up portfolios, watch lists, etc. I was looking at the coal names from day one. They didn't work at first. When they finally announced coal as a play on television, the next day it began working and there were finally significant intraday moves. Though, after getting beaten in the 2 days prior, I did not step up and own the trade.

    It hurts when you put in the time and you know you're right, and you only have that one single intraday opportunity to get it right and you blow it, especially when you have to think about it all weekend at job #2!

    I am currently trading a paper options account because I am tired of seeing all my ideas work, though presenting few intraday opportunities. After a few month I plan to go live with the options account.

    The market gives you plenty of reasons to doubt yourself.

    And so I know you are all right. I already have a plan I believe in for earnings, and I was telling some guys in the office, "after earnings I wonder what I'll do." I need to stop trading anything that looks good, even though the majority of the ideas do in fact end up working. I'll admit I do tend to get caught up with the trading others do in the office. They are trading all day and making a killing. We trade the same things but they have the confidence and ability to take pain that I am still developing. An office is great in that you get access to more ideas, and access to better technology and tools, but you also have other humans getting in your psyche.

    I will begin doing what I should have done right after the peak of earnings: preparing for the off season. I should have had a new set of strategies all ready to go. Backtesting produces confidence and confidence is key, and I know this from experience.

    My current trading stats are as follows:
    R:R = over 2
    % winners = about 45%
    I know that this journal will help with my selectivity. I am confident that I am close to where I need to be.

    And so, here are my problems:
    1. I have issues with confidence
    2. I have trouble getting bigger when I should.
    3. I take trades that may be good for me next year, but not good for me right NOW.

    The stats about show why I am gross positive. Now if I had been getting bigger on "those" plays, I would be net positive. I have fear in me, and so now begins the quest to conquer that fear.

    Problem Example 1:
    ElecEquity, I'm pretty sure I read you bought JPM on that news the other day. I'm sure you had decent size. I had piker size. I KNEW that while everyone was expecting the dividend, the share repurchase was something I hadn't yet heard. If I hadn't heard about it, others hadn't heard about it. I took that trade in an instant and got a nice move out of it.

    Problem Example 2:
    CDE reported earnings and had a great set of days. Gold and silver were making a run after their recent bottom. SLW showing strength. CDE had a nice level around 50 cents. I knew I was catching this at a nice time. I was absolutely convinced that this trade was going to work. I bought in. It began to work, I added. It then came back. I was alright with this. It was against me, I believed in it and added. It went further against me, I added. SLW was not pulling back this much, none of the silver stocks were. CDE went against me just enough to get me out. That trade took my day's gains away. Just moments later it bounced and went a distance. I was livid all day. I KNEW the sell off was irrational. If it screwed me, so be it. But I did not re-enter. My confidence in the trade was shattered by the irrational move. I was emotionally flushed out.

    Problem Example 3:
    I shorted BTU the other day, March 18 I believe. Shorting at that whole - 72. I knew the coal trade had extended a bit. I was confident a nice pullback could happen. Level 2 confirmed that others were taking my side. A buyer was keeping it in the 90s. I was in. He broke, I added. I had taken the trade earlier and covered in the low 80s. This time however, the other coals were showing weakness, and the market was turning. I believe I covered in the 70s when I KNEW this was a longer hold. Yet while in the trade, I begin rationalizing myself out of my initial idea.

    These are 3 examples of the types of trades I take. I showed a news play, a correlation trade, and a reversal. Each of these in my opinion were high probability trades. I did not execute well on them. There are many other examples like these. The other guys in my room obviously made a killing. A lot of my problems come down to fear. The fear of profits escaping. The fear of getting big. The fear of letting a trade I like go against me. With CDE, I can live with it controlling my losses. But I should have re-entered. I was afraid.


    So my initial goals in this journal will be to:
    1. Limit the types of trades I take, and begin properly backtesting and tracking them. The simple end of day journal that I've been writing isn't enough. I need to know that what I'm doing can be profitable if I just play as the trade suggests to play.
    2. Improve my position sizing.

    I am very confident in my abilities and I believe this journal, combined with proper trade analysis and a more rational focus on position sizing can make a big difference for me.

    My trading stats are proof that I am close. I am not getting my ass handed to me, I am, like many, defeating myself.


    Thanks again.
    #10     Mar 26, 2011