Ramoutar Report Volume 8 To Adapt and Evolve is To Succeed. To reiterate the disclaimer: The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions. This post is a bit verbose. It contains many examples relative to the subject matter. Enjoy! As each year passes there is always some new mechanism, trading vehicle, margin or order handling rule thatâs introduced and it throws traders off of their equilibrium. Along with that, there often comes a ânewâ fad, or a âpopular delusionâ that seduces and ultimately destroys them. When I entered the securities industry, I caught the ending of one fad and the beginning of a new one, limited partnerships and biotechs. Nothing compared to the events of late. Within your circle of friends, colleagues and fellow traders, how many do you know of that survived that fateful day of March 31, 2000? Iâm proud to say that I know of many who survived, and know many more who didnât. I always had a deep respect for individuals that allowed themselves to evolve and adapt, as the marketsâ changed. These are the folks that will always be far ahead of the pack, not hunting the next quick hit or boom. During the Internet boom, I did not trade âONEâ Internet stock. Why? They neither fit in my personal trading stable or my personal trading plan. The fundamentals, technicals, and overall behavior were abnormal. Is that wrong? Back then it sure seemed that way, people were amazed and angry that I didnât trade them. I felt like âSerpicoâ, a man who wasnât on the take. I donât see it as missed opportunity in the boom, and I certainly donât see it as luck after the bust, I made a conscious decision to not trade the dot coms. Was I regretful that I didnât trade them? Absolutely. But I was ecstatic that I stuck to my plan, and maybe thatâs why Iâm still around. I gave up huge profits, and later larger losses in exchange for longevity. Hereâs a look at some of the popular phrases I have heard from traders over the years, as new changes came and fads went in and out, and many of them went out with themâ¦ 1990 â âI canât believe how much money I lost in that limited partnership. I sure hope I win some money in that settlement.â 1991 â âOh sure, every one of these companies has the cure for cancer and aids. I like this new CANSLIM thing, and Iâm going to stick with thatâ 1992 â âI canât believe this stock went from $5 to $50, and it still doesnât have the cure for cancer or aidsâ 1993- âDo you mean to tell me, that NAFTA passed and these stocks are higher because of it?â 1995 â âNow why the hell would I want to give up my $65 fixed commission and 15% investment returns to become a SOES trader?â 1996 â âPrice fixing my butt, now we have to trade in teenies? What happened to stocks being quoted and trading in Â¼âs? The SEC is going to do something about this, YOU WATCH!â 1997 ââWhat the hell is an ECN, and who in the world is ISLD? They are outbidding GSCO for 100 shares. Theyâll be out of business in a few months. INCA will crush them. How can anybody make money trading for 100 shares?â 1997 â INCA chairman in an interview with Mark Haines from CNBC :âWould you ever consider acquiring Island?â INCA chairman: âNot in a million years, theyâre and island onto themselves. I donât see how they can grow at $1 per order.â 1998 â âOK, let me get this straight. They have this website on this new thing called the Internet, and people use it to search. This company charges advertising fees, that are three times the amount of print ads, and they have no earnings? You said the symbol is YHOO, and its going where? Iâm going to short the at $15, the hell with them?â 1999 â âI canât trade anymore. You remember that stock you told me not to trade or âshortâ? Iâm still short, and Iâm finished.â 1999- âHow in the world am I supposed to make money trading with decimals?â 2000 â âIâm back after that short, I found some money. All I need is $5,000, and I trade stocks for rebates. Iâll do this for a while and then Iâll get a job with a trading firm.â 3/31/2000 3:00pm- âHey Bob. Is it me, or does it look like somethingâs wrong with this market? DAMN!!! I should have held that short on YHOO.â 2001 â âThis rebate trading thing is awesome. Even though Iâm making money, I really donât feel as if Iâm trading.â 2001 â INCA buys ISLD. LOL!!! 2001 â âBlodgett has not returned any of my calls. He said EBAY was going $400 and PCLN was easily a $700 stock. *&^( IN CO%^ SUC!%$ !!!! 2002 â âSuper Montage is really going to hurt the market. 2003 â âHow high can the S&P go?â Last week â âWhere is the S&P going?â I believe you get the idea. Every time there is a new change in the market, there is always a large group that doesnât survive the change. Why? They are not willing to adapt. Instead of evolving and adapting to the new environment, they hold on to the marketâs past and get very sour about the present, thus sabotaging their future. Not trading what they see, and changing how they think. When I started SOES trading in 1995, I used Level II and nothing else. Every stock was quoted in Â¼âs, moved in Â¼âs and had and average spread of a Â¼. I did very well trading for myself, and for one the firm I was with. I really didnât make technicals my primary analysis until 1995, and that changed my trading forever. I made the realization that I was using price action all along; it was just in my head, now I had the visual. After using TA for a couple of years, I saw a lot of the original SOES bandits from 1988 get washed out, many of them made fun of me for using charts. They couldnât handle the teenies, and the ECNs. It didnât make sense to them, and unfortunately they didnât accept it. Why? The entire market changed. Most market makers showed a size of 100 shares for the first half of 1997, they too had to go through a learning curve of competing with anonymous orders on ECNs that could have been put there by a grocery store owner in the back of some building in the Bronx. They had no idea, so they reduced their exposure. Take a look at a Level II now. Before teenie quotes, when stocks moved through a price tier, they changed by .25; teenies equaled .0625 on the same move. The next washout was the decimals. Now stocks were quoted in pennies and moved in pennies. The reward on a one-tier move in Level II on a 1,000 shares went from $250, $62.50 and then $10, in a span of 3 years. Whoever survived that jumped on the Internet roller coaster as it âclickedâ up the track until that fateful day, March 31, 2000. If you were a trader throughout that whole period, take a momentâ¦sigh with relief and pat yourself on the back. I personally have a very deep respect for any trader I meet who lived through that and survived. My respect is for the stamina and the discipline they had to adapt their plan and themselves to the changing market. What do the traders that entered the market in 2000 and 2001 face? They have narrow ranges; new trading vehicles (ETFs, SSFs, etc) and theyâre cursing the people who talked them into trading to begin with. I have spoken with several traders over the last few weeks; many who were rebate traders making the transition into P&L trading. The prop and LLC area of the market has undergone some radical changes, and itâs affecting the payouts and the cost of doing business for the trading individual. Some of the changes are good and some are bad, it depends which camp youâre in and which house your with. When your trading plan isnât working anymore, you need to look at what youâre doing before you start blaming your quote and execution platforms, costs, and the market. Take a real hard look at your trading plan, trading stable, analysis, scanning, methods and timeframes. This is also a good time to see if your current resources (quote & execution platform, costs, firm, environment, etc.) still meet your requirements. After you have made any drastic changes to your trading plan, it is my advice that you scale back your size until you get used to it. The only way to expect nothing and be prepared for everything is to be ready to change in very short notice. Pretend for a moment that equity pricing and order handling changes again. Letâs say that instead of quotes being 20.01 â 20.02, they become 20.0001 â 20.0002. Is it possible? It sure is. Whatâs the likelihood of it happening? Not too good. If that seems ridiculous to you, look back at the history of the marketsâ changes. Start forgetting about how long you have been a trader, at the end of the day it means nothing. Youâre not a government employee whose going to get a pay raise for your tenure, and a pension when you retire. Youâre trading for a living. Everyday is a new day. What you made yesterday, last week, last month or last year is not the most important thing. What is most important is what you do now, and how you improve it for tomorrow. When I was broker, the most popular saying I heard from the manager was, âYouâre only as good as a your last sale.â I as a trader live by the saying, âIâm only as good as my next trade.â Adaptability is one of the keys to longevity and success.