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Me and Trading

How I got started

This is a relatively long post, which is designed as part of the introductory section for my Trading Primer idea.  This may end up getting broken in to bits.

My history and year 1

When my dad died it changed my life.  That’s when I started to trade.  I had no idea at the time how profound the change would be.

He left me part of his Vanguard account.  It was fully invested.  70 % mutual funds.  And 30% in stocks my dad had picked.  His choices were top companies from the SP500.  Dividend stocks.

I got control of the account in August of 2014.  That’s when I started my new life as a trader.

I decided I would learn to manage this account myself.  The goal I set for myself was to be totally objective, and learn about all types of investing.  I thought of it as the investing universe.

Trading wasn’t even yet a glimmer in my eye.

My former life as a trader

I thought I knew a little something about investing.  I had tried it about 10 years earlier.  About 2004.  But I knew in my former attempt, I had not been objective.

I had come to the market with a bias.  I approached the market like a gold bug.  I thought the whole economy, companies, currencies and so on, were a house of cards, which would come crashing down, any minute.

Accordingly, I invested at first in junior gold mining companies.  They were supposedly a leveraged way of trading gold.  So that if gold went up, they would go up even faster.

I was following a news-letter by Doug Casey, because his way of thinking appealed to me.  He made recommendations, and talked about the companies.

It was a sort of fundamental trading.  Doug Casey would talk about the economy as a whole, then about the prospects of gold mining companies.  I would read about them, and pick some from the list to buy.

I had no idea about reading charts.  There was a vague idea that people did read try to read charts.  But I didn’t even know the term for this was “technical trading.”  And I figured that people who tried to make choices about what to buy, based on charts, were probably stupid.

For a while, I did pretty well.  I think I doubled my account in about a year.  Then I dreamed about how rich I would be, when I doubled the account every year.

It turns out Doug, and I, were totally right about the price of gold.  I even convinced Janel to buy some physical gold and silver.

Through Doug Casey, and the associated Bill Bonner Agora catalogue, we found a famous libertarian in Burlingame.  We went up there to buy our actual gold and silver, and talk about how rich we were going to be, when the US dollar was recognized as an “IOU” nothing.

From the time I began, gold went up nearly 8x.  Silver 12x, by it’s height in 2011.

I would have done better if I’d just used my stock account to buy plain vanilla gold and silver, along with the investment with Janel, and not stocks.

Year 2 of my former trader life, about 2005

After big success in my first year, I decided to try something new, to build on my success.

Doug Casey launched a new service.  Now he was going to follow junior oil mining companies.  He not only talked about the fundamentals of these companies.  He flew around the world and visited him.  It was an entertaining news-letter.

This was the time of the idea of “peak oil.”  Not only did Doug, and other media, lead me to believe gold was going to the moon.  But so was oil.  These calls turned out to be dead on.  I was right.  So right!  Oil soon spiked 5x.

In retrospect, I would say I was right, but for the wrong reasons.  And worse, I not only failed to earn money on my right predictions, I lost money.  My junior oil companies tanked.  I had no plan for stop losses.  So some of my positions literally lost 100%.  The companies went out of business.  My doubled account halved.

But I had some other companies that went up 10x.  That rescued the account to some degree.  I think it stabilized about break even.

Another thing that happened during all this time, which I vaguely noticed, was that Google went public.  The stock did very well.  Apple began its historic run up.  It out-performed anything I bought.  So did other stocks of plain old companies that made things, and were part of the normal economy.

The economic sky didn’t fall.  Gold went up, and so did real estate prices.

Somewhere around this time, I got drastically ill.  It was a prolonged illness, and seemed like it might be the end for me.  I forgot all about investing in stocks.  I forgot the password to my brokerage account, and left the positions in it untouched for years.

Fast Forward

I went through a couple of more life phases, different lives, after the first attempt at investing in stocks.

Meanwhile, learning about how money and banking works continued to be a hobby of mine.  I was interested in it for purely academic reasons.

I learned a lot from writings like Michael Lewis books.  And the gold bug facet of me continued with books like The Creature from Jekyll Island.

The 2008 housing crash happened, which seemed like a vindication of my gold bug thinking.  But I observed that the economic world still did not crumble.  Then the Fed proceeded to print money on an unprecedented scale.  I was mind boggled.  Still, the world did not end.

I felt like I could read Doug Casey telepathically by this point.  I figured he would say they are just kicking the can down the road.  This still wasn’t the “big one.”  Generations of gold bugs have lived and died saying that.

Someday, some of them may live to see it, and hoot at their success.  Who knows when.

Objective study

So with this history behind me, I knew I had not looked at stock investing (I still thought of trading as “stock investing” at that point) objectively.  I’d come to the markets with my bias, and gotten stuck in a little niche.  And it hadn’t worked out well for me.

I also knew that you could be right about something, like the direction of oil, and yet chose the wrong vehicle to make money on the prediction.  And in fact, even be right about direction, make an investment choice on that basis, and end up losing money.

In summary, by the time I came to my new trading endeavor, in 2014, I had failed at my first attempt at trading, quit when I got deathly-chronically ill, realized at a deeper level the ultimate value-less-ness of making money for it’s own sake, revived myself in my next phase of life by trying to “save the world” by making a busienss, Selfport, which was another failure, and then tried real estate.

By 2014 I had succeeded, with Janel, in real estate (the second of my two life phases sandwiched between my two “stock” phases.)  After I called Selfport a failure, Janel convinced me we should invest in real estate, in 2010.

This turned out to be a great idea.  And it was very therapeutic for me.  Because the first property we bought was considered a “tear down.”  I was able to go in and really get to work, get my hands dirty, and rehab the property.

This was a game changer for us.  Once we had rented our real estate finds, we finally had a new stream of income.

Up to this point, all our income had been contingent on Evans Data.  And while there are great freedoms and potential rewards to building a business, rather than working for someone else, over the years, entrepreneurs become “unemployable.”  So that if the business fails, it’s a different version of the worry of losing your job.

I had a new vocation, managing real estate, and in the early days maintaining our rentals myself.  And I liked looking for new prospects.  Even though buying and fixing rentals, and “trading” real estate wasn’t going to “change the world,” like I hoped to do with Selfport, it was very satisfying to simply work on something that succeeded, feel like I was adding something of value to our family.

This helped add to our family support system, without taking so much of my time that I couldn’t focus the bulk of it on the next dream project, when it came along.

So by the time I came back to trading, I was doing well financially.  And I was older, and hopefully wiser.

My dad, on the other hand, had done quite well with his investment portfolio.  He had taken the Warren Buffet approach, of buy and hold, pretty much forever, quality companies.  Vanguard also advocates this approach.

My dad had lived his life with very modest income.  And yet, unbeknownst to me, he’d quietly been investing in stocks for most of his life.  By the time he died, his account was pretty impressive for someone who had lived on an income where most Americans wouldn’t even have a savings.

He would have had a huge draw down during the 2008 crash.  But by the time I inherited his account, it had grown dramatically, from the 2009 low, for 5 straight years.

This was the entrance point for my new phase in life.  Now I would begin my attempt to objectively study the “investing universe.”

Learning and training

One of the first things I knew I had to tackle was charting.  I knew I’d ignored that, scoffed at it.  I hadn’t been objective about that at all.

Also, as a lot of people do, I think, when they decide to learn to invest (or trade) stocks, I immediately began to try buying and selling things.

One of the first books I read was William O’Neil’s How to Make Money in Stocks.  I wanted to be older and wiser, and this just seemed so mainstream.  Contrary to my former contrarian self.

ONeil made sense to me, and I joined IBD, “Investors Business Daily.”

But I was also poking around the web, and reading other books.  I wasn’t going to just stop and settle on one thing.  I had a plan.  Learn about every type of investing, and style.  And by now, the idea of trading had dawned on me.

I observed that some of my first stock picks went up and down.  The first one I bought, when I dipped my toe back in, was BBRY.  It was in a range.  It vacillated by 10-20%.  So while my account went sideways, I realized if I could figure out how to repeatedly buy it on the low end, and sell it on the high end, I could double my investment, or more, in a year, instead of end up flat.

But I found out this was easier said than done.

My study felt kind of random.  I’d spend a few hours here or there, look at new sites, Finviz, Stock Charts, Investimonials, read a book here and there, look at charts now and then, look at various fundamental aspects of companies, try buying or selling this or that.

I’d figured out there was such a thing as “momentum stocks.”  And you could find those on Finviz and in various ways.  On any given day or week, a handful of stocks would be on the move, very volatile.  And some traders specialize in these.

At the time I started this, it was the Ebola scare, and related stocks were on the move.  At an earlier time it had been pot stocks.  There was always something.

I decided I should join a service.  I needed some kind of guidance.  And some way to stay more routinely engaged with trading.  I needed to become more systematic.  To become successful, I needed some kind of training, and regularity.

I wanted to succeed, and actually make money.  At the same time, I was keeping in mind my broader mission statement, to be objective, and learn about all kinds of investing and trading.

I was also no babe in the woods.  It seemed clear to me that there would be many services that were scams, or at least more or less valuable.  So now I had a new sub-mission.  To explore services, but not just academically.  I had to actually try one at some point.

I almost joined one, early on, started by the writer of one of the books I read, called “Superstocks.”  Not to say that was a scam, but his fee was $10k per year.

Combing through sites like Stocktwits and Seeking Alpha, I found more candidates.  Some mentors used pseudonyms, like Superman, which seemed suspicious to me.

Day and Swing trading

Eventually, I settled on Investors Underground.  By this point, I’d decided I probably wanted to be a swing trader.  I wanted to buy great stocks, and hold them for a few months, while they went up.  I got this idea from the “Superstocks” book.

Super-stocks is actually a term William ONeil uses.  In fact Superstocks was the first book I read, which led me to ONeil.  A “super-stock” is like Apple when they first launched the IPod. A great company, fundamentally, that is about to explode, and run up for months or years, to many multiples.

I now know, or believe (I haven’t done a survey…would like to!) that this is what the vast majority of new traders want to find.  This is one of the reasons why a lot of new traders buy cheap flat-lined stocks.  They want to get in on the ground floor.

A lot of new traders also play very cheap “penny stocks,” because they seem cheap.  And there are a host of hazards specific to those waters, that I’d detail somewhere else.

Anyway, my idea was to be a swing trader.  And I found out (can’t recall how) that Investors Underground had a swing trader named Michele Koenig, who seemed legitimate to me.

But when I contacted them, it turned out she was only just about to launch her specific swing trading service.  The main service of Investors Underground was for day-trading momentum stocks.  It was led by Nate Michaud.

Michele recommended I join Nate’s group, and when her service launched, it would be included in my membership.  She said there was a lot you could learn from day-trading, that was applicable to swing trading.  So I wouldn’t be wasting my time.

I had never considered day trading up until that moment.  Jesse Stine, the author of Superstocks, said “Swing trade, never Day Trade!”  His metaphor was that day trading was like “picking up pennies in front of a steam roller.”

Besides, my goal was to learn all about every type of investing and trading.  But I had never intended to literally do it all day every day.  The only reason I was spending more and more time on it, was because I was finding that, by just poking around at random, I wasn’t developing any actual, practical trading skills.

Besides, day trading is one feature of the investing and trading landscape.  Why not learn about it?

And once I did consider it, I noticed that, just as BBRY bounced 10-20% every few weeks, or months, every day there were stocks that moved 10-20% in one day!

I realized that if you could capture even a few tiny % profit every day, it would add up quick.

I don’t live entirely in a cave.  And I’m not young and, hopefully, not naïve.  I knew that day-trading (and most any type of trading) is widely regarded as anathema by most of the public.  Almost all of my friends and family found the idea of trading violently distasteful.  Abhorrent, verging on criminal.

But this was the next step on the path I was pursuing.  And what if it was possible?

The Dream, and history

As I studied trading and the investing universe, a new dream was kindled, a parallel process.  The “social hedge fund” idea.

In these early months of trying to learn to trade, it began to dawn on me that I might go beyond just investing in dividend stocks.  Beyond just managing my dad’s Vanguard account.  If I could succeed, I could theoretically make A LOT of money!

By nature, my head is in the clouds.  But over time, I’ve increasingly tried to stretch myself to get my feet on the ground.  When I was a kid, my dad coached me to “never forget your dreams.”

I don’t want to get my head out of the clouds!  But I do want to actually accomplish things, in “real life.”

I’ve had a lot of dreams in my life.  Never was one of them to be vastly wealthy for its own sake (consciously.)  But I have wanted to do great good, make great art, make products that change the world for the better, on a giant scale!  And I’ve tried.

After my drastic illness that ended my first round of stock investing, in about 2006, I emerged back in to health through attempting to make a world-changing business.

I thought that, maybe the reason I got so ill, was because I wasn’t following my life purpose.  Life isn’t about making money.  It’s about doing something worthwhile, benefitting others, changing the world for the better.

Maybe I got so sick because I’d gone down the rabbit hole of focusing too much on money, with the 2 year long investing endeavor.

My real roots were in spiritual endeavors, writing and art.  My college degrees were in Religious studies, psychology and literature, in that order.

My first mentor and role model in life (other than my dad), was my college professor, Noel Q King.  I regarded him as a true holy man, much more than an academic guide.  When I first walked in to his classroom, I cried with joy.

He was, in a very real sense for me, a guru.  Although he was an anti-guru.  Which was the only fit for me anyway.  He never acknowledged the role.  And he became a dear lifelong friend.

Another seminal part of my history from early days, was that I made my own idiosyncratic version of the bodhisattva vow.  It was absolutely sincere, and I expected it to be the guiding force of my life.

My version of the vow was, “I vow to do the greatest good.  Guide me through whatever needs to happen to me to make me able to do that.”  I made this vow to God.  And since the “bodhisattva vow” is a Buddhist concept, obviously my idea of “God” is….very flexible.

I understood that everyone and everything is interconnected.  From a “God’s”-eye perspective, we are all part of the same body.  This life, and the seeming self, is impermanent.  Everything flows in to everything else.  It’s impossible to be absolutely happy, or lastingly rich, in a context where others suffer, or are poor.

So, when I got deathly ill, I thought of my Bodhisattva vow.  I thought it was a mid-life crisis, and I thought it might literally be the end of my life, if I didn’t get on with my mission.  But not right away.  First I got very interested in the condition itself.

When it comes to studies, I tend to get very immersed, focused, obsessive.  I studied and tried all kinds of medical and health treatments and modalities.  Nothing seemed to work.  I learned about syndromes, illnesses that are hard to define, in a mechanistic medical model.

Around this time, my dad developed a syndrome called Relfex Sympathy Dystrophy (RSD).  An incredibly painful, “incurable disease.”  My dad had many nearly saintly qualities.  He helped many people, and touched many lives, personally.  He was widely loved and admired.

(Not like me.  I have always been anti-social.  I really do want to help others, do good, and improve the world.  But I always wanted to do it in bulk, not one person at a time, like my dad.)

My dad REALLY CARED about others.  And I thought it was ironic that his condition was called what it was…because it was like he cared SO MUCH about the suffering of others, that his sympathy reflex caused a dystrophy.

The actual name RSD refers to the sympathetic nervous system.  But again, from a yoga perspective, the nervous system is a quasi-physical part of our bodies.  It is an electric system, and could be seen as an interface between mind and body.

His condition was impossible for modern medicine to exactly define, like all “syndromes.” There was no particular “cure.”  And it occurred to me that my condition might be like that too.

I thought maybe the treatment I needed was not a physical medicine, but to change my life.  But not in the sense of a new diet, and exercise.  But to actually do my life mission, and do something significant to change the world, or at least try…really hard!

Selfport

The idea that grew out of this was Selfport.  I was so immersed in health modalities at the time, that at first I thought it would be like a website where people could rate and review health treatments, for particular conditions.  And that might have worked.

But one of my dystrophies, or attributes (all of our qualities can be either) which might start to be clear from this personal history of my trading career, is that I have a tendency to see how one thing is connected to another.  It’s hard for me draw boundaries.

I see all the steps that led to this place, and I see many of the ways things might unfold from current conditions.  Which, btw, could be useful, in predicting future market moves.  If it can be harnessed, and directed.  We’ll see.  Early signs are positive!

So with the Selfport idea, particularly in light of syndromes, I quickly expanded beyond health conditions and treatments, per se.

If I was treating my condition by making Selfport (and it was working!), health is clearly more complex than just biological disorders and treatments.

Why do placebos work?  As Andrew Weil said, why are placebos the control?  They are the most intriguing medicine of all.  They should be one of the primary medicines we study.

What Selfport grew in to was an “entrepreneurial platform.”

The theory that I developed was that health involved everything about life.  Diet, exercise, medicines, yes, but also lifestyle, which involves how we think, interact with others, and make money.  And ultimately how we CAN make money.  What options do people have?

My thought was that for many people in the world, the socio-economic model, in which most people saw their only option for sustenance as getting a job, working for someone else (at best!) was not conducive to health, for many.

So what I built, working full time over 3 years, was a website with a menu of entrepreneurial options.  It also included a mechanism for people to invest through the site in each other’s micro businesses.

The idea was to make a platform that allowed anyone, anywhere in the world, to develop themselves to the scale of their ambition, with no earning ceiling, no limits of any kind!

There was no way that most people could have even considered this endeavor.  But since my bread and butter income came from Evans Data, which my wife Janel ran, while I was completely incapacitated, I was able to devote all my time, and money, to this project.

Without Janel, I don’t know how I would have even lived through this phase.  I re-started from a point where I could barely crawl up and down the hall, and built out the idea through 3 years of full time effort.  Everything I’ve learned about business and investing would have been impossible without a wife supporting me in unique ways.

I learned a lot from this endeavor, but ultimately called it a failure, in about 2009. For 3 years I had spent all my extra money, and all my time, building a complex website, visiting VCs, meeting some interesting people that have remained friends.

And many of my entrepreneurial “menu items,” or versions of them, did become part of the modern business landscape: Homeway, Airbnb, Uber, Gofundme, Facebook, Kiva, and others.  And other parts of my idea still have not emerged.

One thing I concluded was that my idea was too complex.  Most of the businesses that ended up being valued at $billions were only one piece of my idea.

But even back then, I did have the idea of simplicity, and phases.  And I still believe the endeavor might have gotten off the ground, if I’d gotten a first round of funding.

But funding in the VC world is a chicken and egg thing.  It’s usually predicated on prior success.

So, end of story.

The Social Hedge Fund dream

Fast forward, back to my early trading days.

The idea started to germinate, that if I succeeded, I might make A LOT of money.

Thinking back to the Selfport idea, I thought, if I could have self-funded it, I wouldn’t have had to abandon it.  I’d basically completed a working version of the website.  It was launch ready.  But I was out of money.

The site was complex, and required at minimum one skilled programmer to maintain it, and continue to develop it.  And funds would have been needed to implement the marketing idea, even though it was very pared down, to start on a local level.

Now, it wasn’t just that I wanted to reincarnate Selfport.  The world had moved on, and so had I.  Some aspects of what I’d done might still be relevant, others not.

And I’d learned things from Selfport, and also become more jaded.  Even as I was developing Selfport, I was asked, how many people do I really think have what it takes to be entrepreneurs?  And I said, everyone, of course!  Mumbling, assuming they wake up to their potential…maybe you could give them some kind of drug…trailing off.

Truth is, most people are lazy.  It would have been an uphill battle to get a majority (or even a large minority) of people to actually self-start.  Of course, there was the investment-in-others part of Selfport.  Which was intriguing.  (There is still nothing out there like the model I built for that.)

Think about Facebook.  It has billions of supposed users.  A large part of the world.  But it’s mostly passive.

Parts of the entrepreneurial economy has happened.  But it hasn’t massively changed conditions in poor countries, nor even statistically raised standards of living in the US and Europe.  In fact, we have had stagflation for 15 years.

If Selfport had succeeded as I’d built it, would that have made a huge difference in this equation?  Probably not.  Even if it had succeed, IPO’d and I’d become a $billionire, it might have changed some lives, maybe even a lot.  But as it stood, it would not have fundamentally changed our global socio-economic modality.

But to give my old self credit, I did have the idea that Selfport was a first iteration.  Like the Google guys, and Elon Musk, my dream was to use a big success on the first iteration to fund future components.  So, a sort of incubator, and framework for the future parts…most of which still have not happened.

(I have no idea why all $billionaires aren’t like these guys, or Bill Gates, either trying to make all the obvious, cool, sci fi like products you can dream up, and or trying to fix all the problems in the world. What else is the point of money on that scale?)

Meanwhile, time has marched on.  We are on a further future lookout than we had 10 years ago.  And we can see clearly that a significant new, and bigger socio-economic challenge faces us.  Robotics and Machine Learning are poised to fundamentally change the way economics have worked throughout history.

But we’re getting ahead of ourselves again.

Baby Steps

So what is the step right in front of me?  And where am I trying to go first?  And then after that?  And so on.

The frustrating thing for me with Selfport was that I had to stop.  I had to admit failure.  Because I ran out of money, and couldn’t attract a large investment.  The work part I liked.  I like working really hard.  I like making big dreams, and working towards them.

So I thought, I am now financially comfortable.  I can work to learn to trade, and nothing can stop me.  I can work as hard and as long as I want at it.  As long as I don’t do something stupid, and lose all my money, I can keep trying until I succeed.

And I had no doubt I could succeed.  And I still have no doubt.  But I didn’t know how long it would take.

And then, if and when I do succeed, I can try my future idea, the “social hedge fund.”

Taking what I’d learned from Selfport, I said, the new idea has to be dead simple.  You should be able to describe it in a text message.  In a tweet.  So, here it is:

“Connecting ordinary investors with extra-ordinary traders for out-sized returns.”

Phase 1

My idea was, and is, simple.  First I learn to trade.  That’s really phase 1, but let’s call it phase 0, and assume that already happened.

If I made money, the idea is to use that money to train, and fund other traders.  Change some lives one at a time.  Give people access to a new lifestyle, with no earning ceiling, that they could probably not have achieved otherwise.

At the time, I’d never heard of a prop shop.  I later learned about those.  Pretty similar to my phase 1 idea.  Proprietary funds, where traders can come to learn, trade, and earn.

The only extra dimension to my idea is to intentionally reach out to people with financial need.  But many versions of this idea have indeed happened.  It’s not inventing the wheel.

Phase 2

Make a web platform that allows ordinary people to invest in super traders.  Ordinary people are defined as:

  1. don’t want to trade themselves (the norm.)
  2. not super rich, but with some savings.

The pitch for this phase is “Vanguard on steroids.”

The main modality of Vanguard is mutual funds.  But when I first joined, and surveyed the available funds, I quickly realized that none of them had achieved spectacular returns.

The best Vanguard mutual funds had achieved what I considered modest or ok returns.  On the order of 10% per year, not compounded, when looked at over a large span of time, and allowing for large draw downs…since the Vanguard ethos is like the Buffet prescription, buy and hold, come hell or high water.

Meanwhile, if you read the (highly entertaining) Jack Schwagger books series, Market Wizards, you hear all these stories about traders who made hedge funds that returned extra-ordinary returns.  40%, 50%, sometimes more, yearly, compounded!

Such traders exist.  And some of them made life changing fortunes for their clients.  But their funds were almost exclusively available to high net worth individuals.

So the idea of phase 2 is to make Market Wizard type traders available to ordinary investors.

Phase 3 and beyond

If this all happened, things could get interesting.  Vanguard has $3trillion under management.  My enterprise could become a large concern.

That would lead back to the incubator idea.  Multifarious businesses and products.  The nutshell pitch of this phase would be “social VC.”  And again, versions of this are happening now, with sites like Gofundme.  And even now, the SEC is reworking rules around social investment sites.

I hope I’m beyond wanting to get rich for its own sake.  One thing I noticed with Selfport was that, even though I said I never wanted that, the idea snuck up on me.  It’s inveigling.  I caught it flirting around the edges of my sub-conscious.

And if it really did happen, super wealth is notoriously treacherous territory for the soul.  Although I’m too old and cynical to swallow anything I read or hear without question.  So I don’t necessarily believe the eye of the needle thing.  But I also try not to dismiss anything out of hand.

Anyway, the ultimate goal is still the ultimate goal.  To do the greatest good.  To produce the “wish fulfilling gem.”  To fulfill all desires, or make their fulfillment accessible to anyone, through their own efforts.  To make all types of suffering only optional.

So I have gone down this road of dreams, and much further down this road than I’ve described here.  But I don’t do it every day, or even often.  I don’t wander around and around in dream territory.  I am not hung up on it.

My day to day routine is still learning to trade, trading, practicing, working, trading, reviewing, learning, working, and so on.  Nose to the grindstone stuff.

But I work in context of the dream.  I have not forgotten the road, and even some of the interesting features and questions that lie further down that road.

Further down the road

If robots did all the work in the world, would a true “investor economy” be possible?  I have ideas and thoughts about that.

As “artificial” intelligence evolves, how will algos and humans co-exist in markets?  How will markets change?  It certainly will happen.  An interesting question to explore.

Will most humans become cyborgs?  Probably.  It will certainly be an option.  How will that change things?

What other products and services will change the socio-economic landscape over the next 10, 20, 50 years?

This certainly will be more wild and crazy in reality that most commentators seem capable of imagining.  It’s interesting to think about.  Could I and my endeavors be significantly involved in some of these developments?

Back to trading

That concludes the aside, about the parallel thought process, inspired by my nascent trading efforts.

But when, in reality, profits seem so tantalizingly close, while the account slowly dwindles, the luster of dreams fades.

I spent a couple of months in “Nate’s room,” trying to get the hang of day-trading momo stocks.  I paid for and took Nate’s video courses.  I floundered.

Then Michele’s swing room opened up.  I slowly spent more and more time in there.  Michele developed a video course.  I paid for that and took that too.

As 2015 wore on, I certainly was learning a lot.  I certainly wasn’t profiting.  But I wasn’t losing interest.  I was fascinated, and daunted.

There was a ton of stuff to learn, and I wasn’t sure how to organize it all.  Charting techniques, market sectors, indicators, tools, market “internals.”  Disciplines that every trader “should” be doing, journaling, making a “plan,” a watch list, and so on.

I started to become aware of many new trading vehicles I’d never heard about before.  There were so many ways to trade, and things you could trade.  Indices, volatility, etfs and 3 times leveraged etf (that degraded with time), options, futures….I wasn’t sure when I would have a sense of comprehensive understanding.

It was not easy for me to merge the academic pursuit to generally understand the trading and investing universe, and also the process to practically focus on something, one or two things, or a small group of things, to practice on, and actually learn how to profitably trade.

I did try putting on trades here and there, and lost in various ways.  But not a lot, relative to my account size.  I touched the Vanguard account less and less, and used the remnants of my 10 year old account to practice on.  It was at Ameritrade, and I got to know and like the software offered there for free, Think or Swim.

Webinars and Tim

Every week Michele and Nate would have webinars.  I consumed a lot of webinars.

Each room had its protocols.  Nate’s room was very crowded and popular. 100s of participants.  There were strict rules, and people would often get chastised for disobedience.  No idle chatter, for one thing.  Not with 100s of people.  It should be strictly trades.

In Michele’s room, the protocol was to share charts.  In Nate’s room, people would call their entries and exits.  In Michele’s room it was considered crude to specify your moment of entry.  The chart was supposed to convey your idea.

I got intrigued by one particular character in Michele’s room.  Tim Parker.  His charts looked like nothing anyone else shared.  They had horizontal waves of color going up one side or the other.  I had no idea what he was trying to convey.

He would also spout out loquacious streams of big words.  People called him “the professor.”  He took big trades.  Sometimes he said his size, and it was big, and he was confident.

He would respond to private messages, and I chatted with him, and asked him questions.  I learned that the horizontal waves on his charts were volume profile.  Volume at price, rather than the more common volume at time.

He said “All futures traders use volume profile.”  He said a lot of things like that, which I suspected, and later learned, were not always true.  Probably a good rule of thumb is “all people are right some of the time, and some people are right most of the time, but no person is right all of the time.”

And if you find someone that is right, and has good ideas, most of the time, it’s probably worth listening.  Tim set me on the path of learning about volume profile, and market profile.

Tim also started to give guest webinars in Michele’s room.  He was my biggest mentor to date.  He seemed like something special to me.  I would say mentors in trading are pretty important.

Tim was pretty young compared to me.  He had come from a literature background, hence the eloquence.  Out of college he had gone to work for a hedge fund, and the rest was history.

He talked about designing $billion bets, and talks with the $billionaire who ran the fund.  He did webinars on “macro” views of markets, which fascinated me.  He did others on market profile, options, and ways he looked at charts, which were not the way I’d heard others talk about charts.

He talked about “empty trades,” trading against initiative, Fibonacci levels, topics that I continue to learn about, and use in trading, today.  To me, he seemed on a different level than anyone else in the room.  And one day, he disappeared, and that was it.  Although, by then, he was on my Tweet deck.

Market Profile

After hearing about market profile from Tim, I set off to learn about that.  One of the first things I found was the Shadow Trader.  The original Shadow Trader was Peter Resnicek.  There is a Shadow Trader website, and also daily radio show, which broadcasts inside Think or Swim, TOS.

Shadow Trader had lots of free information, very well presented and informative, about trading, including tutorials on market profile.

Peter was also a disciple of James Dalton, who invented the concept of Market Profile.  I read (I admit, part) of Dalton’s classic on the subject, Markets in Profile.

(One of these days I’ll finish it.  But even at that time, even with my deep interest, it was hard to stay engaged.  It seemed very dry.  For me, learning this stuff really had to be a combination of theory and practice.  Theory couldn’t strictly precede practice, or it was just too damn boring!)

Market profile works on anything, any product.  But the quintessential product is the /ES.  E Mini futures on the SP500.  Dalton had been trading the ES for decades, using market profile.

As another aside (sorry, this one won’t be so far aside as dream businesses), another early service I considered was called Day Trader Academy.  They traded exclusively the ES.

It did occur to me at the time that the quickest way from point A to point B, (with point B being profitable trading) might be to focus on a single product.  But this defied my idea to learn all about the trading and investing universe.  And also, I was by no means sure I wanted to trade only one product.

Michele and Nate traded all kinds of stocks, whatever was moving.  Tim traded all kinds of stuff, futures on commodities, options on stocks, he was a wild man!

Plus, the Day Trader Academy said they made students throw out everything they had learned about trading, and start fresh.  On one hand, it seemed like it might be efficient to start with them, since I had hardly learned anything.  On the other hand, part of my mission was to learn all the ways people traded, not just to succeed as soon as possible.

But one thing the Day Trader Academy did do, is gave me part of the idea for the “social hedge fund.”  They said they had investors.  And people who could prove their trading on a simulated account, could get funded to trade.

Anyway, the Shadow Trader put out great material.  Brad Augunas ran the daily trading radio show.  And I began to listen to that throughout the day.  I kept trying to find ways to get more and more engaged in trading.  Even 6 month in, I would find my mind wandering.

Peter and Brad were not only informative, but funny.  The idea of “shadow” trader was that they would specify their trades, and their rationale, so that you could “shadow” their trades.  Try to copy, or at least follow, the trade.

There was no membership fee.  I guess Ameritrade pays them for the show.  But if you follow their trades, you can see they are pretty darn good at it.  But the point of shadowing their trades is not to make money by copying them, but to learn how to think about trading, how to make your own plan.

Almost everyone says, including me, that it is almost impossible to consistently extract profits from the market by shadowing someone else’s trade.  This goes way back to my early days of trying to copy Doug Casey’s ideas.

No matter how much someone explains a trade to you, they are almost sure to have ideas that you don’t have, about how to initiate an entry, set stops and targets, determine of the trade is working, if they should add, reduce, scale, etc.

Even if you get ideas that are seeded by someone else, trading partners, chat rooms, whatever, you have to MAKE IT YOUR OWN.  If you want to succeed over time, you have to own your ideas for trades.

FT71

Another person I found in the process of learning about market profile, and volume profile, was FT71.  Futures Trader 71.  Again with the pseudonym.

But FT, as he’s affectionately known, also puts out a free thing.  Every day, on Youtube, he posts a 15 minute video, pre-market, detailing his trading process.

All of these people, when I first saw them in videos, Brad and Peter, FT, and others, I first regarded dubiously, with suspicion.  It was an actual membrane of resistance I had to push myself through, to pay attention in the first place.  A sense of, hm, what’s the scam here?

I started to watch FT’s trader bite off and on.  And over the months, more on and on.  He also had some videos on his website, which were pretty cheap, compared to everything I had purchased up to this point (like the Investor’s underground videos and services…and those were cheap compared to the first thing I almost joined, Jessi Stine’s Superstocks group.)

FT’s videos were a 5 part series that were supposed to explain volume profile.  And the proceeds supposedly went to charity.  So I watched those.

This takes us in to the summer, approaching a year after I started, in some sense.  It was hard to set an exact date or definition for “starting.”  Since each layer I proceeded through felt exponentially more engaged, and more work, than the one before it.  Each time I went deeper, it felt like I was just starting…like everything before that had just been warm up.

Pay services

Another aside, sorry.  Regarding pay services.  There are A LOT of pay services in the trading world.  Some trading cynics say, the only people that make money in trading, are the ones that sell services to traders.

The reason pay services flourish is obvious.  When people decide they want to trade, they want to make a living, or more, get rich.  They want to make money, real money, big money.  They have some money, which they are prepared to risk, even if they haven’t admitted to themselves that they are risking it.

But as soon as they lose once or twice, if not before, they realize they are risking their money.  And even if they only want to make a living from trading, what is a living?  $50k per year?  $100k per years.  So $1000 for a service seems trivial.  Even $5000 for a service seems relatively modest, if it truly results in profitable trading, and pays off with $50k or $100k per year profit.  Or more!

So in a way, selling services to would be traders is a relatively easy sell.  At least for the first time or two times.

And they are not all scams.  But even services that are not scams will not necessarily make you a profitable trader.

Ameritrade itself offers a variety of services in the $5000 and up range.  They have an enormous array of services, ranging from free, to quite expensive.

I just wanted to comment on the landscape of services and costs.  I don’t believe all paid services are scams.  And some expensive ones may be good or valuable.  I have not tried a wide variety myself.  But I strongly suspect it is not a “get what you pay for” type of situation.

I think becoming a successful trader is primarily dependent on the work and discipline any individual is willing to commit to the process.

Year 2

Next to come, I’ll outline how my trading evolved over the second year.

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