So my real name is Rob but you don’t have to be a brain surgeon to figure that one out. Also, if you are feeling particularly ‘Miss Marple’, you may have concluded from my handle that I was born in 1970, therefore making me fairly middle aged. Married, 2 children, dog, some chickens, living in a semi-rural location. Work wise I am lucky as I get to choose what I want to do. I do management consultancy/interim management work in my specialist subject of Internet/Telecommunications/Software when I feel like it. I trade when I feel like it. I tend to do one or the other and not both at the same time.
Currently I am on a (roughly) one year assignment somewhere in Europe running a business unit in a turnaround situation for a multinational corporation. Probably when that finishes, I’ll return back to full time trading for a year or so until I get bored again and somebody rings me up for some help. Or maybe I won’t. I stopped trying to predict the future a few years ago. Nevertheless, this lifestyle solves a problem for me: the solitude of trading vs the human contact I crave as a relatively social individual. I also love working in technology. I always have done and will always continue to do so. I have played a part in many developments which are central to 100’s of millions of people’s lives and that is a great buzz and something I can tell my kids and grandkids about with pride. Also, if I am frank, I am better at building businesses and selling them than I am at trading but I will come onto that shortly. Outside of that, no more clues on my real identity. I value my privacy.
Trading – the early years
I am lucky. I have friends that work in the finance industry who have helped me. It started one evening in February 2009 in earnest in a pub just off Bishopsgate. My friend had been in New York during the Lehman Brothers collapse working for another of the IB’s, trying to stop them from getting taken out too. He seemed happy to be the other side of the main trouble but slightly burnt out and I asked him what the previous nine months had been like. He recounted some of the pressures he had faced and they seemed absurdly huge. It was the first time I got a sense of the enormity of his job. I then asked him towards the end of the night whether I could code something up which would trade automatically. He looked at me and said, “You? Yeah, easy. Just stay within a 3 month timeframe as it all gets very macro outside this”. And that was it.
I wrote a basic trend following system specifically to trade UK equities. It did well for about four months and I thought this was easy. The market then traded sideways and I got chewed up. Not so easy eh? I then concluded the only way I was going to be able to code something up was by learning to trade myself and, since then, I have realised that automated trading is not for me. It took me some time to find the market for me. My market is the S&P500 E-Mini. It suits my personality and I have a healthy respect for what it can do to people.
I have made every mistake in the book. Twice. Sometimes more. I have blown an account. I have traded way too big for my head to handle. I have Martingaled, held losers and cut winners. I have had some spectacular single trade losses; the kind that just make you question whether you should even be allowed near a market ever again.
Eventually I iterated towards intraday trading and realised I was ok at it. I had a good feel for it but lacked patience and would often bail on good trades too early. Eventually it settled down to maybe one or two trades per intraday session. I have been profitable for a few years now but stability in returns has only really come in over the last two years or so. I think it is maturity as a trader rather than as an individual that facilitated this – there is a difference. Someone sage told me you need about six years apprenticeship in this game. I can see that now. At the time it sounded absurd.
Essentially I am looking for one of two things on an intraday basis on ES:
Auction rotations that are strong tests for value and then fading them when it gets sticky in a high value area (where lots of people have already traded). These usually result in big return moves.
Movement from one value area to another on a more sedate basis.
It is usually done with a Depth of Market price ladder (DOM), Time & Sales (T&S) and charts with plenty of volume profiles/market delta on screen. All naked. A few MAs to see where the trend followers come in but often that is coincidental with S&R too. No surprises there.
I also augment the above with some quantitative analysis where I pipe in the data feed directly into ‘R’ (programming language) and do some real time processing on auction rotation sizes, volatility, etc. to look at how it is distributed. This also helps filter out some trades which might look attractive but aren’t really. These are my early attempts at automating some aspects of my trading.
Some days I get a couple of trades, other days nothing happens. Average is about one trade per day per session. Basically I am a lot more selective now than I used to be and prepared to hold for longer periods. I am reminded of the phrase, “What gets you in, gets you out” which resonates strongly for me.
I am conscious of two things and the conflict they cause in my mind:
Methods are likely to change as market structure changes over time. This means I am always looking for things that will be phased in as my current methods become less effective. Always work in progress.
Solid methods stand the test of time.
As a discretionary trader I generally believe that what I do will flow with the market over time. Maybe I make small imperceptible changes every day that keep me in the game. I’m not sure how it works but I do know that continued effort, dedication and analysis pays dividends. Even now, whilst I am on secondment fixing somebody else’s problems, I take a look every day at what is going on. I always have an opinion. I am always ready to participate. It’s like learning to ride a bike – I don’t think you can unlearn it.
So I feel relaxed about the future and the uncertainty it may hold for me.
Tips to pass on
I would probably summarise this in a rather simple way:
Don’t do this unless you really are dedicated to it. This is not a get rich quick scheme. I think I’m a smart guy but my god, this was hard.
Make sure you have money to lose. You will lose it. It is the cost of your education.
Only do this if you get rock solid support from your partner.
Everything you need to know to trade is right in front of your eyes. Fade the herd. Do the opposite of what they are doing on T2W. Learn your market and understand why it is there, who is in it and why they are in it.
You are providing a service to other traders in your market and if you are successful, you will be rewarded for it. What service do you provide in your market? Once you know this, then you have something to work with.
Learning to trade = learning about yourself and your limitations. Be prepared to put work into yourself as well.
Finally . . .
Money does not buy you happiness. It does buy you choices though. Not all choices are good. You learn that with experience too.