The Journey of Making a Living as a Professional Trader

[Wingz]

So I think this will be the last of my 'chart journal' posts here for a while - something seems to have clicked in the process of explaining my thoughts and I'd like to pursue that tangent for a while.

So to explain this chart, none of the lines were used for my decision making, apart from the black vertical ones. The blue ones are entries long, the red ones are exits from those longs and the purple one was a short. The black vertical lines are the settlement time and in all cases where I went long.

This trade edge/idea was based on the time of day and tape reading.

In order from left to right -

• Long -1.41 (settlement 24th SEP), sell half at -1.38s (next settlement, 25th SEP) and the other half sell at -1.16s (moving average 29th SEP).
• Long -1.23s (settlement 29th SEP), sell at -1.13s
• Short -1.10s (tape reading and time of day, also double top) , bought back on average around -1.21s
• Long -1.28s (settlement 30th SEP), sell -1.31s (JUNDEC buyer came in early, price lower than previous settlement in afternoon session)
• Currently Long -1.33s (settlement OCT1 - similar price action to last Friday - it's therefore reasonably likely that we an aggressive move up tomorrow - if not I'm out)

I've basically been going long around settlement and getting out between 3-6pm. I've either gotten out at chart levels (in the case of the extended hold) or due to reading the tape and ladders and visually seeing the JUNDEC buyer or after an 'exhaustive spike'. From my previous posts my bias is long so I've very rarely taken on shorts, maybe on 25% of the days in the last month (taking on longs 90% of the time).

I took on the short at -1.10s because it was a potential double top, there was a battle between and JUNDEC buyer and seller in size and I could feel the buyer winning, it was also around the 'time of day' that the DECJUNDEC came off due to that buyer - I managed to hold onto half until settlement but got out the other half around -1.17s on average, scaling out.

This edge will dry up pretty soon - it's just one guy. From my last few days trading I hope you can see there's a mechanical element but also a subjective one too, there's some intuition and tape reading involved in there too and experience will help deal with the eventual blow out - there are some pretty consistent temporary edges that you can find if you're staring at the screens for 10 hours a day and are willing to trade what you see without expectation.
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I've been watching one of Mark Douglas' Trading course videos recently and in it he used poker players to explain a point. Beginning poker players just play their cards (their technical analysis edge), Intermediate poker players play the other players (seeing patterns of behaviour that you cant see with the charts alone), and the best poker players don't even need to play their cards, they can just play the players blind (regardless of their position they'll find a way to make money).

One of the guys at my firm hasn't used a single chart for the last 3 years and made around £2m per year on average (he is not rainman!). He's one of those advanced players, he knows where all the spreads he's been trading have been for the last few months off the top of his head and goes against unsophisticated traders or hedgers with size for small but profitable moves regardless of where the chart is (although I imagine he knows exactly where the highs and lows are). I only started FLY trading at the beginning of this year taking an entirely mechanical approach (which is extensively outlined in my FLY Guide post - that's my basic edge, he's inherent edge #1) - I've now taken a bit of heat and learnt a few more tricks, managed to see a few of the players in the market and I think I'm now transitioning into the intermediate stage.

It's scary, I feel like I've only just found an edge that I'm confident with and now I'm deciding to venture out, choosing to completely ignore the technical analysis mechanics that got me here for my potential ability to predict the actions of a small number of big players that I see in the tape.

Whatever... #yolo

 

[Wingz]

So the theme of the week for me was Mark Douglas. In the market downtime I was watching some Mark Douglas seminars I managed to wrangle off of one of the old boys.

I started last week with the 6 hr more polished and recent set, how to think like a professional trader. This week I've taken chunks out of his 16 hour mental toughness weekend seminar.

The edge I described in my last post still seems to be working, but it's adapted somewhat. The Jun Dec buyer is less apparent, I'd speculate that it's because spreads have pushed up that he's now onside massively and is no longer fighting the market. I've noticed that people have started to buy the decjundec prior to settlement, so the price makes lows before settlement then actually pushes up rather than down over settlement. So I've been buying a few minutes before and actually getting out of most on the same day. An 'EDGE u cated guess' (thanks douglas).

Another thing I've noticed after indoctrinating myself with Mark Douglas is that I seem to be fully in my comfort zone and not stretching myself. I've clipped up around 30% more in the last month and I don't feel like im stretching myself let alone allowing size to interfere with execution and following my plans.

Part of this is good but another part is really scary. I have barely any emotional reaction to 20k swings during the day. It's like I view a 100 lot trade in the same way I used to view a 1 lot trade, I just don't give a shit about fluctuations. The reasons why are different however.

I know now that regardless of the fluctuations after a series of trades I'll probably end up with more money than I started. So as Douglas described I'm just putting money into a slot machine and pulling the lever, a slot machine where I control the odds.

I'm scared because what I just said is incredibly arrogant, 'yeah man, it's like a slot machine where I control the odds'. Completely ridiculous statement, but it appears to be true.

I think i'm coming from the belief that there needs to be some kind of pain or 'heat' to make money in the markets. It's just now I'm used to going offside and it doesn't feel like heat at all, just part and parcel of trading the way I do.

I'm worried that I'll become like one of those frogs - throw them into boiling water and they'll immediately jump out saving themselves, but slowly raise the temperature over time and they'll just chill out slowly getting cooked and die.

Hopefully I'm one of the smart frogs because I've noticed that there's possibility for a catastrophic loss. Only problem is what appears to be 'lukewarm' water just feels so comfortable right now.

I'm happy that I'm coming to this realisation here objectively however rather than the emotionally charged tick by tick random fluctuations of the market.

I'm aware that there do need to be checks and balances to my actions though, I dont want to suddenly wake up in a bag of shit, an anchor tied to my ankles, sinking to the bottom of the ocean.

But the next steps aren't very clear to me at the moment. I hope the imagery and fear of a potential huge loss will spur my brain into suitable 'what if' scenarios.

 

[dartmus]

it's like a slot machine where I control the odds'. Completely ridiculous statement, but it appears to be true.

imo that's exactly the way it should be except for the bit about it not making sense. It should make sense and it does if you've done the work. I haven't read much and you're in a niche I'm unfamiliar with so I couldn't offer an opinion even if you explained flys in terms I could understand. Besides I don't have any interest in learning about them. However I do enjoy what I'm learning from your descriptions of things such as a jun dec buyer and other generalized trading observations.

I think i'm coming from the belief that there needs to be some kind of pain or 'heat' to make money in the markets. It's just now I'm used to going offside and it doesn't feel like heat at all, just part and parcel of trading the way I do.

Our beliefs should always be optimistic because our minds work overtime while we sleep assuring any differences between belief and reality are corrected.

catastrophic loss

If you imagine you've already experienced that in your past and begin making changes in the present to 'guarantee' it's only a remote possibility then you might take the next step and look at how guaranteeing the remote possibility would be non-catastrophic.

 

[Wingz]

imo that's exactly the way it should be except for the bit about it not making sense. It should make sense and it does if you've done the work. I haven't read much and you're in a niche I'm unfamiliar with so I couldn't offer an opinion even if you explained flys in terms I could understand. Besides I don't have any interest in learning about them. However I do enjoy what I'm learning from your descriptions of things such as a jun dec buyer and other generalized trading observations.



Our beliefs should always be optimistic because our minds work overtime while we sleep assuring any differences between belief and reality are corrected.



If you imagine you've already experienced that in your past and begin making changes in the present to 'guarantee' it's only a remote possibility then you might take the next step and look at how guaranteeing the remote possibility would be non-catastrophic.

I'm glad you can extract some value from what is an admittedly pretty random niche form of trading.

I think your last point struck me the most. I've never had a catastrophic loss but as I keep clipping up every potential loss gets bigger. Every 'normal' loss at the moment would have been a catastrophic one a year ago. This year I've increased my size around 7000%.

At the moment I'm worried because the numbers are so big relative to a few months ago. It just seems too easy at the moment and I know without a doubt that a high probability trade goes hand in hand with a ridiculous loss, and the fact that I'm continually increasing size means that loss will be magnified. It's just a matter of when not if and id like to hedge it before it happens, or not get overconfident and make trading errors if I'm trapped.

I'm always terrified of a huge loss and maybe that's why ive never had one. I just have to keep a step ahead of myself and adapt in the time between.

Thanks for your insights.

 

[dartmus]

a high probability trade goes hand in hand with a ridiculous loss

Only if you think it does ...imo it doesn't have to and I will never accept or adopt that as my own belief. Hope that helps you.

 

[i960]

Only if you think it does ...imo it doesn't have to and I will never accept or adopt that as my own belief. Hope that helps you.

I think its a more likely situation if one doesn't have the ability to either get out or hedge quickly. If one is sizing up because their account allows it - just follow your risk parameters. Biggest loss will most likely increase because account and position size has increased. However, if the positions are instead getting bigger purely due to confidence that might be something to be concerned about.

 

[Wingz]

I think this will take a bit of reflection on my end. I'll look into some beliefs I might have hidden away and try to objectively see if they have any value. Then I'll revisit my trading plan and make sure I'm following it with the clip increases.

 

[traderdemarket69]

How you doing mate

 

[Wingz]

Looking back at my last post I think I could feel what was coming. A really stressful last few months, trading at the front of the curve, taking my biggest loser and dealing with wild swings. A great learning experience though, I've fully desensitised myself to size and forced myself into looking at alternative hedging and 'jobbing' strategies.

Here it goes.

So I initially got short febmarapr around 0.06s, trading the range of around 7 ticks. It broke out so I averaged more at a measured move of 7 ticks, around 12/13s. At the same time I was long the fly in front, the janfebmar around -0.11s.

The febmarapr shot up to around 0.18s-20s (I sold many more) whilst at the same time the janfebmar went to extreme lows of around -20s. SHIT! They should have hedged eachother!

It was in November that the janfebmar starting coming back and the febmarapr stayed relatively stable. I was patting myself on the back thinking the probabilities were in my favour and both were reverting to the mean. My average price in the febmarapr was at that time around -0.12s so a scratch was offered up mid month and I ignored it, holding for a bigger move back into the previous range - plus the janfebmar was coming back!

My aim for the janfebmar was to stay in until it went positive, I got out of it on average around +0.03s during a big intraday spike. I stayed in the febmarapr however... Big mistake. I wanted to get out of what was obviously a strong uptrend at the moving average, I tried to work out for around 0.26s I think but only managed to get a handful of lots out.

Anyway, long story short I stopped out on average around -0.33s a couple of ticks short of the moving average (it then went on to make highs of 1.40s+ - so thats good I guess).

I was still holding onto the febmarapr in utter disbelief that I had gotten out of the janfebmar which explosively trended up for 4 days straight after I had exited.

Now the dust has settled.

I didn't trade this well in hindsight, I didn't trade it well in the moment either. I was looking at this for months, seeing consistent intraday ranges and an obvious uptrend but largely sat on the sidelines.

I ended up losing twice as much on the febmarapr as I made in the janfebmar - due to different position sizing and tick amounts. Which was a more than half my year in one trade - due to rapidly sizing up over the year.

However, albeit a little shaken up in the aftermath I knuckled down during a couple of weeks off over Christmas and I've been working on and experimenting with strategies that I saw during the few months I was in the trades but failed to execute, due to ... basically being a deer in the headlights and influenced by the size I was trading.

So things are looking up!

• I'm desensitised to a larger amount of size now, so what would have been a big trade that would have affected me in the past is now a run of the mill - 'trade your edge'. I guess I was pushing to find my limits and ...I did.
• I'm looking at the markets from a more in depth perspective, not only the flys but the more cost efficient 'straight spreads' focusing on the mechanics and reasons behind fly's breaking out (it's usually one, or a small handful of players that are obvious on the tape and ladders)
• I've learnt to distance myself from my trades more effectively and try to see from the perspective of someone that's flat - I'm much more dynamic.

Back to the grind

 

[Wingz]

Using Nootropics to get an Edge

For the last couple of months I've been heavily researching into 'brain hacking'. I'm a huge fan of Tim Ferris and some of the ideas he put forward in his books have changed my long term goals.

I'm not quite sure how the seeds of the 'nootropics idea' was planted but off the top of my head we were having a discussion in the office about performance enhancing drugs in sports and that then led to talking about adderall and ritalin for cognitive enhancement in trading.

I tried both during university, apparently almost all American kids have ADHD so all my American friends at uni had some. They definately helped, but they're essentially a weaker and cleaner version of methamphetamine. They therefore have terrible side affects and I wouldn't reccommend taking them.

So my slow and steady shift into nootropics begins. I started watching some Dave Asprey videos and encorporated a 'bulletproof coffee' into my morning routine, a coffee with 30g of grass fed butter and 15g of coconut oil. My brain woke up, using the fat as an energy source. I then added omega 3 fish oils, vitamin d3 and a multivitamin to the routine, with a noticeable effect after a couple of weeks.

I then started to study neurotransmitters and their affect on the brain. I started taking some choline supplements that work on the acetylcholine neurotransmitter which helps communication between neurons along with a whole other host of functions. Also a big benefit for me.

So from that journey leads to nootropics, smart drugs, notably drugs that enhance acetylcholine transmission. The first nootropic invented around 50 years ago was piracetam. Science has shifted on now and there are many derivatives of the original compound, however the same mechanisms are still relevant to these drugs, known as 'racetams'. They work on the acetylcholine neurotransmitter to amplify it's effects.

Blah blah blah.... Long story short, I've been taking noopept and phenylpiracetam for the last month now and my p/l has improved 20-80%.

I really have no idea how much it's improved as it's not a controlled study and there are far too many variables to take account of (that % was entirely arbitrary) , but I do know it's improved drastically. I've been taking 10mg of noopept with 2g of choline bitartrate and 1 g of phosphatidyl choline every working day.

I have zero brain fog, I write down my strategies for the next day in the evening and execute flawlessly. I have extreme focus during the day to the detriment of creativity (which is a good thing, being 'creative' in the moment usually means I'm letting emotions hijack my edges) . So im creative in the evenings where I plan my trades for the next day, then just execute. I just do whatever I've written the day previously without any internal conversation. My mood is lifted, I feel happy and focused all the time.

Definately worth researching and potentially giving a go.