Looks Can Kill You: RAMOUTAR REPORT
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.
Zen In the Markets, Confessions of a Samurai Trader…Edward Allen Toppel (I am not promoting or endorsing this book, and I have no agreement with the author, just using it as an example)
Until January 1996, I was a consistently profitable trader and a “so so” investor. One of All-Tech’s (a former employer) customer’s had asked me to trade with him in his account. The fear of trading with someone else’s capital was paralyzing. I could do nothing right for 3-months. Here were some of my emotional chants:
- “Maybe I should short when I want to buy.”
- “Maybe I should buy when I want to short”
- “It’s a conspiracy….the second I buy a stock its stops moving, then it moves against me, I get out, and the second I get out it rips higher. Everyone on Wall Street knows I’m in. they make phone calls to each other and shake me out.
There is no CONSPIRACY THEORY!
The fellow I traded with gave the above-mentioned book to me. While my religion and principle are nowhere near “Zen” the book frightened me initially but made a lot of sense.
Part I “Seeing Through Zen Eyes” (What the hell are those?)
“It is too clear and is so hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate
After having my *ss whipped several times by the market from January 1996-March 1996, and coming home everyday listening to Frank Sinatra “That’s Life” while drinking a shot of Courvoisier and smoking a Cohiba both of which I could not afford for that three-month period, picked up the book and read it.
After taking off the trading cap and retreating to my lavish living room in my TWO-room apartment, that I shared with my ex-wife (whom I was miserable with) the light of demons shone upon me. I realized there was no conspiracy theory; I was my own conspiracy and enemy. The market just is…..whatever it is.
I took a stand and made the decision that the market was not going to beat me anymore…and I would not try and beat the market, just do what it told me. Several years ago a reporter from the Star Ledger, a NJ newspaper interviewed me. She asked me how I felt about the market. My response…”I see the market as a supreme being, it has lived long before my conception and will continue on long after my carcass becomes dust. I don’t question or curse it, I just do what it tells me.” She was baffled; she expected a high-ranking analyst view of the market. None here, I was and still am dead serious on my view.
As the book says: “you must lose yourself to find yourself” as I did. I recouped all of my losses within three months after reading the book. I recouped the losses by swinging for numerous base hits, not home runs. The book did not change my trading; it helped me change myself, which changed my trading. I have not had a losing week or month since March 1996.
Those of you have read my previous articles know my trading mantra:
“Predetermine entry, stop, target, risk reward ratio, rationalize and execute”
I began that method several years ago. It has kept me away from trading dot.coms from ’99-’00 and away from the (same) dot bombs from ’00-present. I left a lot of money on the table by not trading those stocks, but they did not meet my criteria.
You’ve seen in a previous article, “repetition…the mother of success and failure”. In many ways I am very stubborn. I don’t care to look at other software platforms…quote, execution, and scanning, etc. etc. Why? It diverts my attention; I lose focus on my plan. That is one of my trading demons. I identified the weakness and keep myself away from it so it won’t get me. As I sit and sip on a nice glass of 65-degree merlot, I use an example of a friend of mine who is a recovering alcoholic, he stays away from any environment that includes alcohol, and this helps him remain sober. I try to steer clear of situations that invite my trading demons to come out and get the best of me.
Now back to
“It is too clear and so is hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate
I am mentoring two of my friends, two cases.
Case One:
Traded for three plus years. Rebate trader first year turned size scalper on AMEX last year. While he did well in both areas, trading size (5-20K shares) of AMEX stocks killed him. His monthly P&L was in excess of $10K, and to his surprise his AMEX fees were in excess of $10K. He put out limit order that lasted more than 5 minutes and then went to the specialist book. These orders became “billable tickets”; our friends on the AMEX floor (specialists) were charging 4 tenths or $4.00 per thousand on top of his commissions. They smashed him.
He is my friend’s son, I devoted weeks to getting him to evolve. I have introduced him to another strategy, intra-day swing scaling. We’re in week four: 1st week- $300 losses per day, 2nd week- flat to minimal losses, 3rd and 4th weeks- net, net, net up $200 per day (avg) only one losing day ($600 on FAST 3/12, my bad), trading 400-600 share lots. It’s not luck and it’s not a coincidence. It’s sticking with a plan. The streak can only be broken if the streak of discipline and focus is broken.
His current weakness is being too conservative and trading with scared money. While those are two very valid and potentially good weaknesses, they cost money.
I had him following me on many trades. We predetermined EST and RRR and executed the trades. Did awesome on most of them, risk reward ratios were a 1:2 minimum with scale ins at more favorable ratios.
When I didn’t have contact with him (intermittently, several hours here and there), he fell off of the path. Why? His emotions got him. By no means is he a dunce (one of the brightest guys I have traded with), but he was searching for a fire with a lantern.
Case Two:
A friend. He has been paper trading for several weeks now, hoping to go live soon. Like case one, I am very proud of him. He is very disciplined and able to separate his emotions from his trading, to a strong degree. Within the same age as case one, we all have many things in common.
Several times it seemed like he was a contrarian on several of the trades that case one and I were in. I challenged him on many of the trades, and in a few cases his calls were correct. However, he didn’t have a substantial reason for entering some of them. I called him on a contrarian trade he made today, asking him why. Initially the response was, “I just want to see what happens.” I became very aggressive with him, and later the trade worked in his favor. I had case one go on the other side of the trade to take a 4-cent loss of 200 shares.
Case two became very angry at the end of the day, slamming the desk and walking off of the trading floor, a promising indication that he’s taking paper trading seriously. Based on his performance so far, I believe he wil be an outstanding trader.
At the end of everyday, I request both cases (individuals) to perform post-mortems on the best and worst stocks they traded. After we conclude our market wrap discussion, they perform the post-mortems and then scan for the next day’s stocks.
At some point next week I will release our trades along with the 1 & 5 min charts, I believe they will really help you.
What’s the conclusion?
- Predetermine entry, stop, and target, risk reward ratio. You can never predict the outcome of the trade; you can only minimize the outcome’s impact on you.
- Face and accept the fear (risk) face and accept the greed (reward)
- Execute the trade and manage it until stop or target is met.
We cannot control what the outcome of the trade is going to be, but we can control the impact of the trade’s outcome on us.
I know it’s very hard to separate your emotions from your trades, but it can be done. Start by using EST and RRR.
- Paper trading if done properly can produce losses
- Live trading if done properly can produce gains
- Focus on sticking to your plan, not making profits. Adhering to the plan will result in profitable trading.
I hope to have all of the trading blotters and charts available to you next week.
If you would like to see previous reports, PM me for links or email me.
You may also find me at www.esignalcentral.com
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.
Zen In the Markets, Confessions of a Samurai Trader…Edward Allen Toppel (I am not promoting or endorsing this book, and I have no agreement with the author, just using it as an example)
Until January 1996, I was a consistently profitable trader and a “so so” investor. One of All-Tech’s (a former employer) customer’s had asked me to trade with him in his account. The fear of trading with someone else’s capital was paralyzing. I could do nothing right for 3-months. Here were some of my emotional chants:
- “Maybe I should short when I want to buy.”
- “Maybe I should buy when I want to short”
- “It’s a conspiracy….the second I buy a stock its stops moving, then it moves against me, I get out, and the second I get out it rips higher. Everyone on Wall Street knows I’m in. they make phone calls to each other and shake me out.
There is no CONSPIRACY THEORY!
The fellow I traded with gave the above-mentioned book to me. While my religion and principle are nowhere near “Zen” the book frightened me initially but made a lot of sense.
Part I “Seeing Through Zen Eyes” (What the hell are those?)
“It is too clear and is so hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate
After having my *ss whipped several times by the market from January 1996-March 1996, and coming home everyday listening to Frank Sinatra “That’s Life” while drinking a shot of Courvoisier and smoking a Cohiba both of which I could not afford for that three-month period, picked up the book and read it.
After taking off the trading cap and retreating to my lavish living room in my TWO-room apartment, that I shared with my ex-wife (whom I was miserable with) the light of demons shone upon me. I realized there was no conspiracy theory; I was my own conspiracy and enemy. The market just is…..whatever it is.
I took a stand and made the decision that the market was not going to beat me anymore…and I would not try and beat the market, just do what it told me. Several years ago a reporter from the Star Ledger, a NJ newspaper interviewed me. She asked me how I felt about the market. My response…”I see the market as a supreme being, it has lived long before my conception and will continue on long after my carcass becomes dust. I don’t question or curse it, I just do what it tells me.” She was baffled; she expected a high-ranking analyst view of the market. None here, I was and still am dead serious on my view.
As the book says: “you must lose yourself to find yourself” as I did. I recouped all of my losses within three months after reading the book. I recouped the losses by swinging for numerous base hits, not home runs. The book did not change my trading; it helped me change myself, which changed my trading. I have not had a losing week or month since March 1996.
Those of you have read my previous articles know my trading mantra:
“Predetermine entry, stop, target, risk reward ratio, rationalize and execute”
I began that method several years ago. It has kept me away from trading dot.coms from ’99-’00 and away from the (same) dot bombs from ’00-present. I left a lot of money on the table by not trading those stocks, but they did not meet my criteria.
You’ve seen in a previous article, “repetition…the mother of success and failure”. In many ways I am very stubborn. I don’t care to look at other software platforms…quote, execution, and scanning, etc. etc. Why? It diverts my attention; I lose focus on my plan. That is one of my trading demons. I identified the weakness and keep myself away from it so it won’t get me. As I sit and sip on a nice glass of 65-degree merlot, I use an example of a friend of mine who is a recovering alcoholic, he stays away from any environment that includes alcohol, and this helps him remain sober. I try to steer clear of situations that invite my trading demons to come out and get the best of me.
Now back to
“It is too clear and so is hard to see. A dunce searched for fire with a lit lantern. Had he known what fire was he would have cooked his rice sooner” The Gateless Gate
I am mentoring two of my friends, two cases.
Case One:
Traded for three plus years. Rebate trader first year turned size scalper on AMEX last year. While he did well in both areas, trading size (5-20K shares) of AMEX stocks killed him. His monthly P&L was in excess of $10K, and to his surprise his AMEX fees were in excess of $10K. He put out limit order that lasted more than 5 minutes and then went to the specialist book. These orders became “billable tickets”; our friends on the AMEX floor (specialists) were charging 4 tenths or $4.00 per thousand on top of his commissions. They smashed him.
He is my friend’s son, I devoted weeks to getting him to evolve. I have introduced him to another strategy, intra-day swing scaling. We’re in week four: 1st week- $300 losses per day, 2nd week- flat to minimal losses, 3rd and 4th weeks- net, net, net up $200 per day (avg) only one losing day ($600 on FAST 3/12, my bad), trading 400-600 share lots. It’s not luck and it’s not a coincidence. It’s sticking with a plan. The streak can only be broken if the streak of discipline and focus is broken.
His current weakness is being too conservative and trading with scared money. While those are two very valid and potentially good weaknesses, they cost money.
I had him following me on many trades. We predetermined EST and RRR and executed the trades. Did awesome on most of them, risk reward ratios were a 1:2 minimum with scale ins at more favorable ratios.
When I didn’t have contact with him (intermittently, several hours here and there), he fell off of the path. Why? His emotions got him. By no means is he a dunce (one of the brightest guys I have traded with), but he was searching for a fire with a lantern.
Case Two:
A friend. He has been paper trading for several weeks now, hoping to go live soon. Like case one, I am very proud of him. He is very disciplined and able to separate his emotions from his trading, to a strong degree. Within the same age as case one, we all have many things in common.
Several times it seemed like he was a contrarian on several of the trades that case one and I were in. I challenged him on many of the trades, and in a few cases his calls were correct. However, he didn’t have a substantial reason for entering some of them. I called him on a contrarian trade he made today, asking him why. Initially the response was, “I just want to see what happens.” I became very aggressive with him, and later the trade worked in his favor. I had case one go on the other side of the trade to take a 4-cent loss of 200 shares.
Case two became very angry at the end of the day, slamming the desk and walking off of the trading floor, a promising indication that he’s taking paper trading seriously. Based on his performance so far, I believe he wil be an outstanding trader.
At the end of everyday, I request both cases (individuals) to perform post-mortems on the best and worst stocks they traded. After we conclude our market wrap discussion, they perform the post-mortems and then scan for the next day’s stocks.
At some point next week I will release our trades along with the 1 & 5 min charts, I believe they will really help you.
What’s the conclusion?
- Predetermine entry, stop, and target, risk reward ratio. You can never predict the outcome of the trade; you can only minimize the outcome’s impact on you.
- Face and accept the fear (risk) face and accept the greed (reward)
- Execute the trade and manage it until stop or target is met.
We cannot control what the outcome of the trade is going to be, but we can control the impact of the trade’s outcome on us.
I know it’s very hard to separate your emotions from your trades, but it can be done. Start by using EST and RRR.
- Paper trading if done properly can produce losses
- Live trading if done properly can produce gains
- Focus on sticking to your plan, not making profits. Adhering to the plan will result in profitable trading.
I hope to have all of the trading blotters and charts available to you next week.
If you would like to see previous reports, PM me for links or email me.
You may also find me at www.esignalcentral.com
