Some of you reading this may recall that the title to this post is somewhat similar to a post I wrote a year ago.        

The title of last year’s, similar-sounding post was “My case against stops”.

Like a politician campaigning for election, I can change my tune. 

In my case, not to appeal to one audience versus another, but because the facts have changed.   My reason for being against using stops in the previous post was that I did not want to wait for the market to decide when I would get out of a trade by hitting my stop.  I wanted to take responsibility to liquidate the trade.

However, in today’s much more volatile markets, very often the market moves too quickly for even the fastest trader to react.  By the time the trader sees the market moving against him and decides to get out of the trade, the market may have moved five or ten ticks.  Today’s markets can move at such speed that a planned four tick loss can easily morph its way into an eight or ten tick loss.

I advise newer traders to use the tactics on Photon to automatically place a three, four or five tick stop when a trade is entered. 

 Whether the trade goes in their favor or not, I advise moving up the stop so that the stop is a few ticks behind the current price.  Should the trade backtrack these few ticks, the stop will be elected and the trade will end either capturing most of the profit or resulting in a small loss.

I do not like giving any trade much room.

I prefer having a close stop and taking two tries at a given trade, rather than giving a trade much room and trying it only once.

As to politicians changing their story to match the audience, I think that the following quote from Fuller Warren in a debate while he was running for Governor of Florida in 1948 takes the cake.

When asked what he thought of alcohol, he famously said:

“If you mean the demon drink that poisons the mind, pollutes the body, desecrates family life, and inflames sinners, then I’m against it. But if you mean the elixir of Christmas cheer, the shield against winter chill, the taxable potion that puts needed funds into public coffers to comfort little crippled children, then I’m for it. This is my position, and I will not compromise.”

Of course, he won.

Wishing you success in your trading,  Jeff

Copyright © 2008 by Jeff Quinto all rights reserved

3:30PM - 5:00PM - Terry Liberman will talk about the Market Profile in the Conference Room - Terry’s emphasis will be how to use the Market Profile in your trading, now.

Wednesday, April 2nd

8:00AM - 3:15AM - Trading

11:30AM - tour of the CME floor courtesy of Harry Mikas from Man Global - let Jeff know if you would like to visit the CME floor

3:30PM - 5:00PM - Linda Raschke will speak in the Conference Room about trading and setups she uses in today’s volatile markets

Thursday, April 3rd

8:00AM - 3:15AM - Trading

3:30PM - 5:00PM - Ken Gaus presents an “Introduction to Transformative Trading”

Friday, April 4th

8:00AM - 3:15AM - Trading

11:15AM  Lunch at Ceres in the lobby of the Chicago Board of Trade Building, 1½ blocks east of our office

Copyright © 2008 by Jeff Quinto , all rights reserved

Next Monday, the day after Easter, all European markets will be closed in celebration of Easter Monday.  Eurex will be closed so there is no need to get up in the middle of the night to trade Bund and DJ EuroStoxx 50.

The next holiday that you would not guess from your vantage point here on this side of the pond is May Day, the first of May.  Once again, there is no need to get up at 1:00AM to trade Eurex, it will be closed.

As for me, I would not trade US markets on these days.  You deserve a day off now and again, so why not do something you like on what is likely to be a low-probability day.

Wishing you success in your trading,  Jeff

Copyright © 2008 by Jeff Quinto
All rights reserved

What should you do when you violate your own rules?

What should you do when you take off a stop to give a trade “more room”?

What should you do when you let a trade skid over your daily limit?

What should you do when you are frozen in a losing position and you are watching your account deteriorate before your eyes?

Should you finesse your way out of the losing trade?

The answer to all of these questions is that the moment you realize you are violating your own rules, you should immediately get out.

In the case of traders using Photon, just hit the “Get Flat” button and cancel all of your orders.

I call this “Getting out Ugly”.

The object of “Getting out Ugly” is to immediately end the undisciplined behavior.  It does not matter whether you are barely above your daily limit or massively above your daily limit, all you need to do, right then, is to get out.

Getting out in this way may not be elegant, but it will end the further destruction of your account and your confidence at whatever point you ended the trade.  However, bad your situation is, getting out of the trade stops further damage, then and there.

Once you are out of the trade, you can calmly reassess your options and, after a meaningful break, you can begin trading in a planned, disciplined fashion.

In trading the discipline to follow your own rules according to your written trading plan needs to be a habit.  In fact, it needs to be your most important habit because:

In trading as in life, “you pay the price of discipline or the price of regret”.

Wishing you success in life and in trading,  Jeff

In our proprietary trading business, we had many good traders, several excellent traders, and one extraordinary trader. 

A great deal of what I have learned about electronic trading came from training this extraordinary trader and watching his progression from neophyte to world-class trader.  Over time, he became one of the largest and most consistently successful traders in the market that he traded.

Unlike many traders who do not want anyone to know what they are doing, this trader was happy to tell anyone who would listen what he did and why he did it.  He even suggested that we place new traders on either side of him so that the new traders could see what he was doing, as he did it, and learn to trade from his example.

At his suggestion, we placed new traders on either side of him using the same trading software and looking at the same charts.  Additionally, this extraordinary trader would shout out what he was doing as he was doing it for the benefit of the entire trading room.  In time, he brought his nephew and his best friend to sit on either side of him.  He was committed, as we were, to the success of the traders he was training.

However, the traders on either side of him, even his nephew and best friend, could barely hold their own trading after watching him trade for months.  They had a master trader telling them exactly what to do, in real time, while this master trader was making real money and they were barely able to break even.

How could this be? 

Everyone wants to be able to watch what a successful trader does so they can see what they should do.  How could these new traders be given what everyone else would judge to be the opportunity of a lifetime and not be able to make anything of it?

After much thought, I believe that the reason that sitting next to a world-class trader, who shouted out the trades he was doing, did not work because successful trading must come from within the trader.  Certainly, you can learn from other traders, but you must find your own path to success. 

In a way, having the obviously-successful trader telling the new traders what to do thwarted their progress because they only learned to rely on the great trader and never developed the great trader within them.

There is no easy way to learn to trade, but one thing is clear, in order to be successful at trading the skill must come from within you.

Wishing you success in your trading,  Jeff