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

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.
stockYes, 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.

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

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 Inaugarationand 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 ..

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

IMG_0272As 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.

Better Off? Electronic Trading vs. Open Out Cry

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%

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

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.