From poker player to Level 2/tape reading prop trader

M

modifiedtype

Allow me to state what I did and what I plan to do.

I played poker (pokerstars id: tenaflyhood) for 3-4 years. I was bringing home something around $1000-$1500 a month. I had a paralegal job at the time. I enjoyed poker but less so as time went by. I also felt pursuing a legal career was not the one for me. I am a Korean American, raised in NY.

Long story short, I joined a equities prop trading firm in Seoul 3 months ago.

There are about 20 traders total at my firm.
Some are technical analysis based traders.
My team, on the other hand, trades off of level 2/ time and sales, scalping for 1-10 ticks, with anywhere from 1000-10000 shares at a time.
Holding period is usually less than 30 minutes.

I admire many aspects about trading: patience, the zero sum nature, and psychology. I know poker, like trading, isn't pure gambling and will require a serious commitment. One thing that I have going for me is that I have experience grinding poker day in and day out. Those who play poker online will know what I am talking about.

Some Rules/Restrictions follow for my daily trading
Ticker: gold mining stocks (HMY, HL, GFI)
Stocks Price: $10 or below
# of shares: 800 shares as of current

I look at GLD, GDX, and AUY for direction. I do not use indicators, but I do look at moving averages.

I would like to share my journey with you. I would like your ideas, advice or anything else that comes to your mind. I currently start as a amateur prop trader.

Tags: Level 2, Time and Sales, Rebate, Scalping, Prop Trading
 
Quote from modifiedtype:

Long story short, I joined a equities prop trading firm in Seoul 3 months ago.

There are about 20 traders total at my firm.
Some are technical analysis based traders.
My team, on the other hand, trades off of level 2/ time and sales, scalping for 1-10 ticks, with anywhere from 1000-10000 shares at a time.
Holding period is usually less than 30 minutes.

Some Rules/Restrictions follow for my daily trading
Ticker: gold mining stocks (HMY, HL, GFI)
Stocks Price: $10 or below
# of shares: 800 shares as of current

I look at GLD, GDX, and AUY for direction. I do not use indicators, but I do look at moving averages.
More...

Hello! Any situation has 2 components - an environmental component and a personal component. From environment I mean where you are trading, what kind of people are there other than you, what kind of software you guys use etc. which will affect everyone. Personal component is about yourself, your experience, discipline, risk mgmt etc.

So, lets answer these environmental issues:
1) How many of 20 traders are profitable in your firm?
2) What is the churn-rate/burn-rate/half-life of traders in your firm - do they last 6 months on average or 1 year before they lose all their savings?
3) among these 20 guys, take top 3 guys - how does their PL looks like? how many months/years they have been trading and especially with this firm?
4) What software you use? Do you think your software/internet speed is good? What kind of comms structure and split you have?

You have already given a personal background. Just one more question here - how has been first 3 months at the firm? How many weeks profitable out of 12/13 weeks? overall net profitable or losing money after 3 months.

Well above questions are intended to give you some food for thought and taking a hard look at your performance. I wish you success.
 
9/25 News/Summary/Stats

[News] *GLD and GDX found bids today, although towards 30 minutes to the closing bell, we saw again a reoccurring pattern of failing to hold support for majority of GDX portfolio stocks.
*Dollar slumped. I use the dollar index UUP. More often times than not, gold (risk asset) has an inverse relationship to USD.
*GDX portfolio is reshuffled.
Any stock with market cap below 750M is replaced with international mining company stocks.

[Trading] Gross +45, Net +15 (I only trade GDX portfolio stocks)

Stocks traded: HL/HMY/KGC (positive news, upgraded by Citi)/IAG
*Presence of Buyer or Seller, Relative Strength compared to GDX (Morning/Afternoon)

KGC Huge morning buyer until 11am. His long entry was seen @ 5.06-5.07 and exit @ 5.16(+/neutral). Jumped on for small gain.
IAG (neutral/-): Both buyer and seller present at 5.00 from 2:30pm. GLD/GDX and daily pivot/support. Joined short after GLD/GDX breakdown. Shorted 800 shares @ 4.97. Exited at 4.95 and 4.94.
HMY (+/+) Lack of big buyer/seller. Lot of whip saws. Small negative or broke even on many trades + commissions.
HL (-/neutral). Usually AUY and HL give good entry and exit point of views for the rest of gold stocks.

(Range)
KGC 5.00-5.22 (22 ticks) Volatile
IAG 4.85-5.08 (23 ticks) Volatile
HMY 3.47-3.61 (14 ticks) Less Volatile
HL 3.21-3.33 (11 ticks) Stable

[Review of Trading performance]

There were many break even trades + commission. KGC long at retracement (5.16) had good risk reward with bid holding at 15. however, I did fail to consider buyer exiting his position.
Also, I will have to remind myself to take liquidity only when at least 3 conditions are met (GDX direction and momentum converging with GLD on the charts/buyer or seller present for the specific stock/pivot level/level 2 bid thickening and offer being hit when long or vice versa when short )

Daily pivots to consider for 9/26 Thursday
GDX 25.7 25.5
GLD 128.67 129.00
 
Quote from gmst:

Hello! Any situation has 2 components - an environmental component and a personal component. From environment I mean where you are trading, what kind of people are there other than you, what kind of software you guys use etc. which will affect everyone. Personal component is about yourself, your experience, discipline, risk mgmt etc.

So, lets answer these environmental issues:
1) How many of 20 traders are profitable in your firm?
2) What is the churn-rate/burn-rate/half-life of traders in your firm - do they last 6 months on average or 1 year before they lose all their savings?
3) among these 20 guys, take top 3 guys - how does their PL looks like? how many months/years they have been trading and especially with this firm?
4) What software you use? Do you think your software/internet speed is good? What kind of comms structure and split you have?

You have already given a personal background. Just one more question here - how has been first 3 months at the firm? How many weeks profitable out of 12/13 weeks? overall net profitable or losing money after 3 months.

Well above questions are intended to give you some food for thought and taking a hard look at your performance. I wish you success.
More...

Fact of the day: Did you know that more than 25% of professional traders go on to become professional gamblers?

Gmst, it will serve me better to answer the questionnaire honestly here but please do understand that I will leave out exact names of traders at my firm.

3 months so far
July 2013: Net P&L -400
August: -150
September Current: Goal is to make net positive this month which is now very realistic.

Q1/Q3 Reply:
Q1 How many of 20 traders are profitable in your firm?
Q3 Among these 20 guys, take top 3 guys - how does their PL look like? how many months/years they have been trading and especially with this firm?

For the 4 traders in my team for whom I can speak of, they all are profitable (monthly, weekly). Specifically,
Trader J
My personal mentor. Maybe 1 out of 5 days are small negative. A $5k-$10k/month. No negative months or weeks. He states that his P&L has decreased over the years because of HFT on shorter time frames. He admits it is getting harder to trade off level 2/time and sales. I have no reason to doubt his statement. He's been trading for over 10 years.
*Style: ultra short time frame trader ( ~ 3 min), level 2 utilization, 1-5 tick target, 5000-10000 shares or more at a time. Trader with most volume at our team. What to learn from Trader J: enter/exit strategy, routing strategy, providing liquidity and receiving credits on high volume low volatility shares.
Trader S
Probably the most volatile trader of our team. In contrast to Trader J who likes to secure profits incrementally and immediately as soon as his trades start working for him, this trader usually has a preset exit and usually does not deviate. What does that mean in terms of his P&L? Sometimes I would see a great entry and $300 positive trade go breakeven or even negative. That being said, on his positive days, he is seen at the top of the leaderboard.
*Style: Short time frame trader (1 min ~ 30 min), level 2 utilization. His updays/downdays are augmented by his style of trading. What to learn from Trader S: Contrarian style, ability to withstand riskier situation for greater profits, keen ability to pick tops/bottoms.
Trader K
Tight but Aggressive strategy - looks only for great setups and presses hard on great risk/reward setups. On the other hand, he is flexible enough to exit at break even price when trade seems to go the other way. Seems to be the most stable. Granted he has been with the firm from 2008, he is improving exponentially especially over the past few months from what I've seen.
*Style: K learned from S over the last 3 years, and so he is able to see which trades are working and which ones are not. Has same style as Trader S. What to learn from Trader K: his ability to pick up stuff from others, in other words his open mindedness.
Trader W
Switched from intraday longer time frame trading to scalping a year ago. He is 4th in terms of P&L (I am currently the dark horse at our team, P&L Ranking 5 of 5)

Q2/Q4 Reply
Q2 What is the churn-rate/burn-rate/half-life of traders in your firm - do they last 6 months on average or 1 year before they lose all their savings?
Q4 What software you use? Do you think your software/internet speed is good? What kind of comms structure and split you have?

I am the last one to join this firm this year out of 2 recruits. The other recruit has left due to reasons unspecified. There is no capital contribution requirement, split is 70/30. Split can be adjusted as I become profitable up to 90/10. Sterling platform is used.

The other 4 traders are the biggest resource. I can monitor their trades (entry/exit price, routing strategy via screenshare etc). In contrast to the other few prop trading firms (there are only a few US equities prop firms), talk/discussion/inquiries even during trades is part of the team culture
 
Quote from modifiedtype:

Fact of the day: Did you know that more than 25% of professional traders go on to become professional gamblers?
More...

Nopes I didn't know that. Do you have reference for this 25% stat - or is it more on the basis of what you have heard.

Modified dude, great answers and you have been a sport I must say. I see a lot of people hiding and running away from tough questions.

I also liked the way you have analyzed trading styles of each trader at your firm. This will help you a lot to learn from them, and I mean you are already learning from them. If I have to put my money, I will give you 1:3 odds that you will be successful in this game.

Good Luck.
 
9/26 News/Summary/Stats

[News] *Dollar surged on better than expected US jobs data. which means more chance of Fed tapering in December. For me as a trader this means I will be looking for shorting opportunities in gold stocks which is a safe haven asset.
That being said, today's session emphasizes that as day traders we must be quick to react on changing conditions.

GLD and GDX pivot points 25.7/129.00 worked well as resistance levels from the get-go. My short entries worked well - when trading with the trend, entry timing and positions are easier to read on the tape. As for exiting, there was ample time to exit using low-cost ECN's (EDGA, Bats BYX Only) and midpoints (rebates).

However, there was divergence activity the leading indicator (Gold futures GLD in this case) and the ETF stock (GDX) occurs, it may be best to stay in the sidelines and observe.

Looking at the charts now, let's review what we saw. First, GLD holds 127.60 level at 3:15; thus failure to make lower low has been confirmed. This was followed by a convergence in activity - GDX was being bought, shorts were covering, and GDX rapidly saw a trend reversal @ 25.00. Level of resistance becomes level of support.

[Trading] Gross +15, Net -9 (I only trade GDX portfolio stocks)

Stocks traded: IAG
*Presence of Buyer or Seller, Relative Strength compared to GDX (Morning/Afternoon)

IAG (Morning weak/Afternoon weak, then strong)
Lots of selling seen. Much different from what was witnessed yesterday.

(Range)
IAG 4.98-4.75 (22 ticks) Volatile

[Review of Trading performance]
Offers were getting refreshed at 4.80 @ 3:20 and so provided good risk to reward ratio. Volume on offer side at 4.81 seemed thick enough for 1 tick loss exit if wrong. Short Entry for 800 shares at 4.80/4.805. Trade did not work out for reasons above. Covered some at 4.81 and all at 4.82. (Net -$20.45 on this specific trade which erased my winnings)

Daily pivots to consider for 9/27 Friday
GDX 24.80 25.5
GLD 128.00 128.20 127.50
 
Quote from gmst:

Nopes I didn't know that. Do you have reference for this 25% stat - or is it more on the basis of what you have heard.

Modified dude, great answers and you have been a sport I must say. I see a lot of people hiding and running away from tough questions.

I also liked the way you have analyzed trading styles of each trader at your firm. This will help you a lot to learn from them, and I mean you are already learning from them. If I have to put my money, I will give you 1:3 odds that you will be successful in this game.

Good Luck.
More...

Gmst, that's very generous. Your sincere criticism is welcomed.

That statistic was from Vault's guide to sales and trading. I believe it was very high. I was both surprised and relieved in the sense that maybe there's a common trait that traders/poker players share.
 
Quote from flashtrader777:

How long have you been trading?

Do you find it less difficult or more difficult than poker?
More...

Not long. I've been trading equities for 3 months professionally. Before that I had a bunker oil/coal commodities trading gig for 6 months. Bunker oil was enjoyable as the firm that I worked for was a major broker/trader in Korea; coal not so much. Natural gas started to look like it would replace coal and regional players couldn't compete with commodities trading majors like Glencore. For those interested, see the following graph for change in demand.

http://www.eia.gov/todayinenergy/detail.cfm?id=6990

To answer your second question, I hesitate to give you an answer. I can guess that you have played poker and have done well if you're asking. In both, you are dealing with incomplete information. However, I have to keep in mind that whenever I enter a position there are hedge fund managers and large institutions on the other side of the trade who have large amounts of capital. For what poker players lack be it higher education or capital they make up for it with guts and intuition.
 
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