Trading Tip #12: Had a Bad Trade? Handle it Like a Bad Golf Shot.

Posted on March 11, 2013 by David Greenberg

Trading Tip #12: Had a Bad Trade? Handle it Like a Bad Golf Shot. It is Your Fault. Deal With it Quickly and Always Move Forward.

One issue that holds back most new traders, and separates the good traders from the great traders, is the ability to move forward after a bad trade. How many times have you heard someone say, “I lost money the market when it went the wrong way. I should not have listened to my broker. This guy said the stock would go up I am so pissed I listened to him, I actually meant to be long”?

As a trader, you need to own your trades. No one has a gun to your head to put on a trade. It is nobody else’s fault if you lose money. When you are out talking to your friends about a good trade, do you then give credit to someone else? No, of course not. At those times, you are the superstar. Continue reading →

Trading Tip #7 – Never Trade in Pain

Posted on February 4, 2013 by David Greenberg

Trading Tip #7 Never Trade in Pain and Know When You’re Burnt Out and Need a Day Off

Pain

This trading tip is meant more for the day traders and people who trade their own money. I understand the traders that trade for banks or funds are probably not going to be able to walk in their boss’ office and say “I’m not in the mood to trade today” or “I’m in pain today, and I think it’s better for me to stay flat for the day.” Continue reading →

Trading Tip #4 – Being Able to Admit When You’re Wrong

Posted on January 22, 2013 by David Greenberg

Trading Tip #4 – Being Able to Admit When You’re Wrong

I remember the last conversation with my ex-wife just before we started the divorce. I sat her down, looked into her eyes and I said, “I’ve spoken to all the mathematicians, and it is theoretically impossible for me to be wrong every time.”

As a trader, one thing I know I am good at and have no issues with is admitting when I’m wrong and then changing direction quickly. It is a must to be successful .

Being right is over-rate. I would rather be wrong and be profitable than try to prove I am always right and be a bad trader. After managing hundreds of traders and trading for over 22 years myself, I have seen the one trait that is most important to be a good (or great) trader – and that is the ability to know you’re wrong and to take action quickly. Being wrong is, in itself, not a major issue. The swift action that is taken after is the most important thing. I will be address this in a future blog post that I’ll aptly call ‘Screwing up and how to make the most of it.’

I’ve always taught my traders, as well as my executive coaching clients, that pain and pleasure can be the key towards a successful career. The biggest issue that some traders have, and in time destroys their ability to trade profitably, is the inability to simply admit they are wrong. The fact of the matter is that, on the trading floor, 60% to 70% of our trades each day were bad trades. The key to money management while trading is simple – cut your losses and ride your winners.

There are too many people, both in business and in trading, that I’ve seen destroy what could have been a very positive and lucrative career – simply because they were either too arrogant or too insecure. They were too proud to admit when they were wrong. These were people who did whatever it took to prove to others and themselves how right they are instead of quickly changing their course of action and re-directing their thoughts and energy to a more profitable outcome.

Odd as it may sound, I made more money in trading being wrong than I did by being right. The simple reason is that when I realized I was wrong I could reverse my position or get out and cut my losses.

Let me give you an example. There were times I would be long five lots of crude oil. (5000 thousand barrels of oil, which seems impressive but is not). If I was long 5 lots of crude oil at $95.10 and sold it at $95.11, I have simply made $50 on the transaction. In this example, we will assume I am long five lots of crude oil at $95.10. The market starts drifting lower $95.09 $95.08 $95.05 $95.02, and I start feeling the pain of losing trade. I start getting the sense that I am wrong, at which point I hit a 50 lot bid at $95. I go from being long 5 lots of crude oil to being short 45 lots. (45000 barrels )The market trades at $94.99, $94.95. At $94.90 I buyback 10 lots, then at $94.88 another 10 lots. – the market bounces and I cover the remaining 25 contracts at $95.00. The 5 lots I was originally long was enough to show me that I was long and wrong, and it was time to get out and reverse and follow the trade through the other side. I lost $500 on the first 5 contracts I was long, but I ended up making $2,200 on the 45 lots I was short for a total on the trade of +$1,700

There are many times that, instead of just admitting that it’s a bad trade, the trader does what I feel is one of the worst things that can be done. The trader adds to losing position. There can be (false) justifications in the traders mind for doing this. He might say to himself “there is support” while looking at his charts. He might say “the market has to go back up“, or worse – he can say the famous last words of many traders, “I hope the market goes back up”. “ As I spoke about in Trading tips #3 – there is no hope in trading.

The real issue adding to losing positions is that, many times, it works. People use dollar cost average, and if this works 6 out of 10 times, the trader feels that it is worth it in the long run. Well, it’s not. Take, for example, Trader 2 initializing a long position in Apple at $690, just after 9/19/12 when Apple settled at $702.10 The odds are on his side. However, the 4 out of 10 times it doesn’t work can be enough to blow the trader out of his position and, at times, even out of a job.

Trader 2 buys Apple at $690. There are analysts on the financial news networks and blogs speaking how Apple is expected to go to $1000 in the near future. The market rallies over $700 and slowly starts drifting lower. Then it gaps lower to $678. The trader continues to add to his initial buys at $690 – convinced that the he is right and that this is just a minor correction in the market. He says to himself “the market always comes back.” As we all know, Apple continue to drop to $500 at which point this trader could of had the trade that ended his career –

So, the key to this trading tip is straightforward. Stay light on your toes so you are always able to get in and out of positions with out mental stress. Never stay married to a bad position and, as I spoke about it in Trading Tip #1 – Leave your ego at the door. Trade within your own size, and be able to admit when you’re wrong quickly, get flat or reverse. I have said, and will continue to say, in my trading and business blogs – being flat is often the best position. It is the one and only position that you can look at the market from both sides realistically, honestly, and without prejudice to see where the market is headed.

Remember you can always get back into a trade. No traders are prefect, so don’t try to be.

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Trading Tip #3 – If You Hear the Word “Hope”

Posted on January 19, 2013 by David Greenberg

Trading Tip #3 – If You Hear the Word “Hope”

THERE IS NO HOPE IN TRADING. It is like I tell my executive coaching clients who trade – If your thoughts keep returning to “I hope it goes up” or “I hope it goes down”, GET OUT!!! Get flat and take another look at your view of the market. Hope is on a date with an old friend of mine and, trust me, it is not going well. Too many traders are concerned about being flat and missing part of the trades. Don’t be. You can always get back in. No one catches every part of a trade. Being flat is the best and only way to think clearly, even if its just for a moment. How many of you have been crushed in a down move by hoping the market would go back up or saying “ this market has to bounce“? The most important thing about understanding market movements is that the market doesn’t have to do anything. No one is bigger or smarter than the market, and if you think you are, in time you will be carried out like so many traders before you that you never heard about.

Yes, there will be times that you get out of a trade and – the moment you do – the market will go your way. DO NOT WASTE YOUR TIME GETTING UPSET. I have a lecture named “[email protected]*ng Up and How to Deal with It”, and this is for not only for traders, but for everyone – because the simple and true fact is that everyone [email protected] up.

Traders need to understand that when I traded on the floor, almost 60% of my trades were bad trades. I could have sat on my butt and kicked the crap out of myself, but if I did, I would have missed so many good trades. So, if you get out and the market goes you’re way, don’t spend more then a second getting pissed. Just step back in.

I will explain more in Trading tip #4 – Being Able to Admit When Your Wrong …. coming soon.

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Trading Rule #1 – Leave your ego at the door.

Posted on January 17, 2013 by David Greenberg

As President of Sterling Commodities, part of our risk management for the Clearinghouse was to go over all of the traders accounts every night. We needed to watch and analyze their trading patterns so that we could tell when it was time to talk to a trader and tell them to pull back or even take a few days off to regroup. We were able to tell when traders were about to move to the next level of trading – both in size of positions and risk tolerance – and then give them guidance. We helped them move to the next level.

The ability to see how everyone trades and their styles had its drawbacks mentally. Being a medium size trader myself, I had to deal with the issue. While I might have made 25k on a good day, there were traders that made 50k, 75k, and a few that would make 100′s of thousands of dollars on a big event day. Events such as a major OPEC statement, a hurricane, or other world events. I remember how, at first, I would question my own trading while comparing myself to some of the biggest crude oil traders in the world who cleared through Sterling. I quickly learned that all traders need to trade within the parameters of their comfortable levels. I remember the first time I made the cardinal mistake in the pit. It was one of those crazy days when the action was high and my pulse rate was higher. News had just come out and the market was flying! We loved trading in days like that. I saw a paper broker get an order from his clerk and he quickly tuned in to the pit and ask for a quote in November/December spread. I pushed my way through a few people to be first and I screamed ’68 bid’ He looked right at me and he screamed as loud as he could ‘SOLD!!!!!!!!!!!’ As I was wiping his spit off my face I realize I screwed up. (As a floor traders, we are taught to always say the amount your willing to take. For example, 68 bids for 50.) However, stupidly I screamed ‘BUY EM!!!!‘ I saw there were bids that came in to other brokers around the pit and felt like a big shot. He screamed ’400!!!!!’ Well, I could have said ‘No, I’ll take 75-100 contracts’, which was my normal self-imposed limit and looked like an ass and have him shove up my butt screaming ‘Don’t ever [email protected] say buy em to me.’ or I could just take them. So, I took them. There was also the ten-lot rule in the pit. If you didn’t put a number on your bid or offer, you were held to 10 contracts. However, most traders didn’t take just ten. Do that enough times and no one will ever trade with you or trust your bid or offer again.

What many traders need to realize is that, at times, you end up in positions you didn’t always plan on. Sometimes, someone bigger, smarter and with more money wanted you in and fooled you into taking more than you wanted. This could be done in many ways. However, the way it happened that day was there was a flood of bids in the spread that hit the pit. Orders were put in different areas of the pits to the largest paper brokers. Large companies often used multiple brokers around the ring to help disguise what they were doing – with the flood of orders hitting the pit, I felt I was safe to take em all. Well, once the broker got off the rest of the 1000 lot order to a few locals (traders who trade their own accounts), all the bids in the spread got pulled and the spread collapsed.

YES, THERE WAS ORDER STUFFING BACK IN THE OLD DAYS OF PIT TRADING.

The lesson learned is to stay within your own comfort levels. Only stepping up your size when you feel you’re ready and not because someone you went out of dinner with the night before told you how much he or she made. What I was able to learn by knowing everyone’s positioning in the clearing house was that many traders (ok, almost all traders) exaggerate what they make. So this is the rule of listening to others when it comes to money – whatever they tell you they make, cut it in 1/2 and take some more off. Remember the fish was THAT big!!!! There are two things that most men lie about. The size of their position, and, well, you know the rest.

Case in point, one day the CEO of Sterling was in the elevator with one of the largest metals traders, who will remain unnamed. Gold was up $25 on the morning call, due to world events. In the mid 80′s a $20-$30 gold move didn’t happen often. This trader was telling everyone how he was long 300 contracts. When everyone left the elevator the CEO said hey “——”, you can say what you want, but I saw your position in your account and I know your long only 30 contracts. He Laughed and then walked out. But, at Sterling, we made sure no one knew anyone else’s positions and, more importantly, about what others made.

So, stay in the size level you feel that you will not lose sleep over and realize that many medium and small traders ended up making more money than the traders who had the need to trade huge every trade. Medium to small traders can stay light on their feet. They tend to be able to change positions faster with less emotional attachment.

In the end it all adds up.

Another case in point. Trader 2 was what I called an ego trader. He had to trade big. Every day he would be up and down. Up 20,000 on Monday and down 30,000 on Tuesday. Down 20,000 on Wednesday and up 35,000 on Thursday. Friday he’d be up 10,000. He paid huge commission and had emotional swings all week to end up making 15k for the week. I, on the other hand, chipped out about 2,500 a day, and after commission I made more than him. I once went over to him saying ‘If you traded 20 – 30 contracts at a time and chipped it out could you 4000 a day.’ He answered with ‘Of course I could’. I said ‘That’s over 800k a year with less stress, less commission and less mood swings.’ I saw many traders do like I did. Trading smaller. Chipping it out and making a very good living, with much less risk then most traders.

So, my main point of Trading Rule Number 1 is this: Don’t try being a hero – they often wind up getting blown up and blown out. Stay within yourself and, at times, test trading larger position – when and if the time and the markets are right.

For more trading tips, watch the video below or contact me.

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What Does the Inauguration and My Second Wedding Have in Common?

Posted on January 15, 2013 by David Greenberg

What does the Inauguration and my second wedding have in common?

Positively nothing and that is the issue!!!!!

In my early 20′s, while getting ready to walk down the aisle, there was hope and change for my future. After many years hope of the relationship went out the window and it was time for a change.

My first wedding, like so many others, was one filled with many guests – college roommates, fraternity brothers, old friends, new friends, family, a great band and, of course, the premium bar. 20 years later, during my second wedding, after many years to mature and learn from past mistakes, and with my future brighter that had been before, we simply had my very close friends and our family members around us. We had a piano player, a small dinner, and yes, of course, the premium bar. If anyone wanted to give us a gift, we had them make a donation to Make-A-Wish foundation and we made 2 children’s wish come true and I kept my promise to my friends,

Everybody was home in bed in time for Leno. !!!!!

During President Obama’s first Inauguration, the nation and the world was looking for the next chapter in our American history. We were looking for hope and change. Even if you didn’t vote for him, the day was something that we will always remember. You’ll recall where you were while Barack Obama put his hand on the Bible and took the oath of President of the United States. The walk down Pennsylvania Avenue was one of pride for the country, the Inauguration speech was one for the history books, and the parties that evening were some of the biggest and best presidential parties of all times.

The upcoming Inauguration will be President Obama’s second trip down the aisle. Like so many of us, he is now more mature and has more wisdom and a better idea of what his vision is of what lies ahead. This President has openly said he feels the wealthy should be taxed at higher rates and that the middle class should be saved. This President, while asking many people to pay more and to cut back so they can feed their families and pay their mortgages and credit cards, feels entitled to the second walk down the aisle. It is my humble opinion, with unemployment as high as it is, and taking into consideration the fact that millions of people are surviving on food stamps, as well as all the struggles that now face our nation, it would have been prudent for President Obama to simply have a small Inauguration Ceremony in the Oval Office with his family and close friends around.

There are people that will say that the parties that he will stop off at for only a few minutes, which cost almost 40 million dollars, were donated by his generous followers Expensive Inaugaration and not by the United States Government. Wouldn’t it have been a kind gesture that instead of all this money going to parties, gowns and limos it had been donated to a cause that would have truly made a difference? Wouldn’t it have been a kind gesture if the President, instead of spending close to 110 million on security and other Inauguration related expenses, allocated the money to a cause to feed the homeless or help children in need? If he made his Inauguration speech in the oval office – as many people watching it on TV’s all throughout the world would have heard it.

It is time that we, as a nation, look at the money we are spending. As I speak with my executive coaching clients on their own wealth management, I let them know that the best way to ensure their kids have the same respect for money, how to save it, and how to spend it wisely, is to lead by example. It is time for our President and other politicians do the same.

$2,000,000,000 spent on the Presidential race!?!?! Add that to all the others congressional races and it adds up to an obscene amount of money. The real question is – What is the real value we are getting for it??

So far I just don’t see it ..

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ICE vs. NYSE – Is It time to turn the lights off on the trading floor?

Posted on December 20, 2012 by David Greenberg

ICE vs. NYSE-

As a former Board member of the New York Mercantile exchange, and after dealing with the ICE while at NYMEX, I find the news today very interesting.

In 2000 the ICE made an offer to NMYEX. Or should I say more of a demand. The demand was that if NYMEX didn’t invest 10% into ICE, then they would go after all of NYMEX’s products .

This started a war between NYMEX and ICE that continued for years. ICE was founded by members of Goldman Sachs and other of NYMEX’s largest customers. The NYMEX Board under estimated ICE and it continued to grow and take over more market share.

There was a time I felt a merger between the two companies would enhance the company’s bottom line and stock price. If the two exchanges could cross margin their energy products, it would open up a tremendous amount of equity which, in turn, would enhance volumes and help both exchanges grow.

After the NYMEX IPO, NYMEX and New York Stock Exchange were in talks to merge, but these talks fell apart over pricing and management issues.

If the New York Stock Exchange is smart and understands that the world of trading has changed drastically in the last 10 years, and they are considered old school as well as losing market share by the year, they will need to consider this possibility of merging or being taken over by the ICE very seriously.

The staff and board of ICE are on the cutting edge and could rebrand the NYSE, which has been left behind on the exchange front. The way that the New York Stock Exchange handle the closing of the exchange for two days during super storm Sandy, that they could’ve easily open the exchange while not opening up the building, shows me they are concerned about their brand and didn’t want the public to realize that without anybody in the building trading could have continued without issue.

After September 11, 2001, all the exchanges made contingency plans that if New York City was closed down for an extensive period of time the exchanges could still open the next day without issue.

Once again, looking at this deal between ICE and the NYSE, the real question is – is there a way to cross margin products -stocks, futures, and derivatives to free up even more equity which will enhance volumes on both exchanges?

As someone who traded, was President of a Clearinghouse, and was a Board member of a major exchange for seven years as well as an Executive Committee member, I feel ICE taking over the New York Stock Exchange would be very beneficial.

It will be interesting to see how regulators look into this deal. The CFTC had no issue allowing ICE, which is a foreign exchange based in Atlanta, to create and put on their platform a WTI crude look-alike product and settle it on NYMEX settlements while having no authority to look at positions because ICE was regulated by the FSA in London.

NYMEX still holds the record of any exchanges value on their IPO and the sale of the exchange to the CME.

The debate of this merger will be enjoyable to watch from my perspective. Please feel free to leave comments I look forward to hearing your views.

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Better Off? Electronic Trading vs. Open Out Cry

Posted on December 6, 2012 by David Greenberg

As the only exchange Board member in the world that voted against electronic trading, I ask you: As traders and investors are we better off now with electronic trading then with open out cry?Electronic trading volumes are down. They got want they asked for – killing open out cry – all the exchanges are done with their IPO”s and people have cashed out. What’s next for the markets?

Now what is next . . .

Exchange Weekly Volume Tracker as of 11/30

CME volumes were down -16% y/y (+12% m/m) in November; with IR -22%, Equity Index -16%, Energy -17%, FX -5%, Comm & Alt Invst -2% and Metals +11%.

ICE Futures volumes were down -8% y/y (-4% m/m). Swap Futures volumes were down -4% y/y (-9% m/m). CDS weekly cleared volumes were down -29% y/y (-48% m/m) in the US and -40% y/y (-31% m/m) in Europe.

US Cash Equity volumes were down -17% y/y (+2% m/m); with Tape A -17%, Tape B -31% and Tape C -7%. US Options volumes were down -21% y/y (+3% m/m).

European Cash Equity volumes were down -23% y/y (+1% m/m) at DB1, -22% y/y (-11% m/m) at Euronext and -6% y/y (-4% m/m) at LSE. Derivatives volumes were down -31% y/y (-5% m/m) at Eurex and -1% y/y (+24% m/m) at LIFFE.

Asian Cash Equity volumes were down -9% y/y (+4% m/m) at HKEx, but up +7% y/y (+12% m/m) at SGX. Derivatives were down -8% y/y (-3% m/m) at HKEx, but up +22% y/y (+8% m/m) at SGX.

Latin American Cash volumes were up +12% y/y (+3% m/m) at Bovespa and +12% y/y (-4% m/m) at BMV. Derivatives were down -2% y/y (-11% m/m) at BM&F and -51% y/y (-34% m/m) at MexDer.

CME Group IR through Nov 30

MTD ADV: 4,573,645 (21 days)
Y/Y: -21.81%

QTD ADV: 4,379,664 (44 days)
Y/Y: -7.39%

CME Group Equity Index through Nov 30

MTD ADV: 2,685,385 (21 days)
Y/Y: -15.81%

QTD ADV: 2,516,519 (44 days)
Y/Y: -20.02%

CME Group Energy through Nov 30

MTD ADV: 1,504,996 (21 days)
Y/Y: -17.34%

QTD ADV: 1,587,969 (44 days)
Y/Y: -6.83%

CME Group Others through Nov 30

MTD ADV: 2,281,271 (21 days)
Y/Y: -0.66%

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Apple Stock Hit by Panic Selling: ‘Someone Yelled Fire’

Posted on November 16, 2012 by David Greenberg

Reposted. This original article was posted on CNBC’s website yesterday.

Forget the “fiscal cliff.” The real panic on Wall Street is over Apple’s stock. Nearly every mutual and hedge fund has piled into Apple [AAPL 525.62 -11.26 (-2.1%) ]during its spectacular rise over the past few years. Now, these same funds are scrambling for the exits as the stock goes through an equally spectacular decline.

Apple plunged to a six-month low Thursday as funds rushed to take profits on the stock before it’s too late. Shares are now off 25 percent since late September—shortly after the iPhone 5 launch and a month before the iPad Mini introduction.

The stock, once up 74 percent on the year, is still up 30 percent for 2012. That’s why Wall Street is getting out while it can.

“Someone yelled fire in the theater where the hedge funds were safely booking their year-end profits—and as traders do, they will trample you trying to be first to get to the exit,” said David Greenberg of Greenberg Capital.

More than 800 hedge funds and mutual funds counted Apple among their top ten holdings at the end of the third quarter, according to data from Insiderscore.com. That means the once unstoppable electronics innovator has likely been responsible for the bulk of investors’ returns this year.

Exxon Mobil [XOM 86.14 0.07 (+0.08%) ] is a distant second among top holdings, according to Insider Score, with 20 percent fewer funds counting the oil company among its top holdings. Microsoft is a distant third with nearly half the funds counting the software maker in its top ten as Apple.

“Apple was the classic case of no more incremental buyers of the stock,” said Enis Taner of RiskReversal.com. “No matter how bullish a story, you need new buyers of the stock each and every day, or it will go down. Simply put: Apple has run out of them.”

Besides panic selling, the world’s most valuable company faces the daunting fundamental task of growing a colossal revenue base at a fast enough rate to keep growth-oriented managers satisfied. The company booked $156 billion in revenue at the end of its fiscal year in September on higher sales of Macs, iPods, iPhones and iPads.

“The new product aspect has faded recently as the newer versions of their products provide less of a reason to upgrade,” said Stephen Weiss of Short Hills Capital. “While Tim Cook is a capable executive apparently, his background is in procurement and engineering, not innovation. So who is driving this?”

Some investors and analysts suggest that Apple is going through the rough transition from a growth story to a value story. With a 2 percent dividend yield and a forward price-earnings ratio nearing 10, the stock could have this new class of investors salivating at these levels.

“We believe that Apple is transitioning from a hyper-growth story to a more traditional, high quality branded company story,” said Toni Sacconaghi of Bernstein Research. The analyst, who has an $800 price target on the stock, believes Apple’s next big announcements will be an increase in the dividend and share repurchase.

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