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12/25/2008

What to do with the dreaded black hole - time off from trading

If you worked in a dead-end boring job, you would pray for time off.

If you hated what you did, you would count the days until you could just sit on the couch and vegetate.

But, as a trader, you are living the most exciting, most exhilarating experiences anyone could imagine every day that you trade.

You don't look forward to time off.

It is the black hole of non-trading that many of you find depressing.

Here we are at the beginning of your annual black hole of ten days off from trading.

You want to be productive in advancing your trading and you do not want to lose the edge in your trading that you have honed throughout 2008.

So, what can you do for the next ten days when it makes no sense to trade?

You can:

Read (or reread):

The Dip by Seth Godin - this book tells what it takes to succeed and what to do if you are not likely to succeed in what you are attempting.

Market Wizards and New Market Wizards by Jack D. Schwager - read what all these great traders have to say.

Unleash the Warrior Within by Richard Marchowicz - this is a book about success and fear by someone who has attained the first and overcome the second.

Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay - this was written in 1841. Read the stories and you will think of 2008.

Snowball: Warren Buffett and the Business of Life by Alice Schroeder - This is what I am reading over the holidays. At 900+ pages, I will be occupied until January 5th, at least.

Workout:

You can go to the health club or you can exercise outside. If it is too cold outside to run, you can take series of adventure hikes no matter how cold it is.

Analyze last year's trading:

Go over your trading records and establish statistics, by day and by month, to measure your progress. In doing so, you will undoubtedly uncover things from your 2008 statistics that will help you in 2009. In Transformative Trading, this is the first Pillar of Transformation, "learning from your past successes and failures".

Improve your written trading plan:

If you do not have a detailed written trading plan, write one. If you have a plan, improve it. Remember that trading is a business and like any successful business it needs a business plan, in this case a detailed trading plan.

Plan for next year:

Decide what you want to accomplish in 2009. Your goals should be reasonable and they should be achievable. Beware of setting rigid monetary goals. Instead, your goals should reflect how you intend to advance in your trading. Next week, I will be writing about how to grade your trading and how to plan for improvement by advancing to the next grade.

In the meantime, you can:

Work on your interpersonal infrastructure - This is the time of year to show everyone in your family and all of your friends that you appreciate their support all year. The holidays should provide both quantity time and quality time with family and away from trading. I am writing this for myself, actually.

Lastly, for good wholesome family entertainment, you and your family can watch, read and listen to Jeff 24/7 here, here, or here.

Have a wonderful holiday, Jeff

If you would like more information on improving your trading in the Electronic Trader Mentoring Program or are interested in finding out more about trading in the Photon Trading Room, please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124.

Posted at 1:24 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

12/15/2008

The Homer Simpson School of Futures Trading

Homer Simpson described the way a lot of people trade futures electronically when he said,

“There are three ways to do anything:

the right way,
the wrong way, and
my way.”

When asked what his way was, Homer said,

“My way is the wrong way, only faster.”

This perfectly describes many unsuccessful futures traders who insist on trading multiple futures contracts before they have demonstrated their ability to trade single contracts profitably.

In the liquid electronic futures markets we trade, you can trade the same way trading one contract, as you can trade ten contracts.

As you are often losing money while you learn to trade, why not lose less, rather than more?

My advice is to only trade one contract per trade in a given futures market until you become consistently profitable.

Once you become consistently profitable, you can increase the number of contracts you trade, as long as you remain profitable on a consistent basis.

Simple enough.

If it is so simple, why do so many people insist on being a bigger trader than their P&L dictates?

In my case, I remember trading on the exchange floor when everyone, me included, wanted to be a big trader.

It was a macho thing for sure.

However, when I realized that my money was made trading relatively small size and making money nearly every day, I set aside being the world’s biggest trader in favor of earning a worthwhile living.

In today’s electronic futures markets, it is even easier to learn to trade as a one-contract trader, than it was on the floor of the exchange.

In electronic markets, no one knows, or cares, how big a trader you are.

You should trade one contract until you can make 20 ticks a day for four out of five days and, only then, become a two-contact trader, with a goal of making the same 20 ticks a day, albeit on each of two contracts, for four out of five days, at which time you become a four contract trader.

In this way, you are increasing your size as you demonstrate consistency and, in so doing, you progressively increase your P&L on a measured, rational basis.

On the other hand, you can always be a big trader before your time and do it Homer’s way which is, as we now know, the wrong way only faster.

If, unlike Homer, you would like to find the right way in futures trading only faster, you should look into my Electronic Trader Mentoring Program.

If you would like to hear what other traders, like yourself, have to say about the Electronic Trader Mentoring Program, check out the testimonials tab at

www.ElectronicFuturesTrader.com.

To find out more, e-mail me at jq@fptrading.net and make 2009 the year you find the right way, only faster

Wishing you success in your trading, Jeff

Posted at 6:54 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

12/6/2008

Futures trading and opera - one in a hundred and still not done

We have a family friend who attended college on a vocal music scholarship after winning a series of music competitions leading to a singing tour of China while he was still in high school.

After graduating from college, he applied to the Masters Program in vocal music at one of the two best opera master’s programs in the United States.

He was one of more than twelve hundred singers who applied to the program and was one of one hundred singers who were offered auditions.

He was chosen to be one of twelve who were accepted into the program.

He was one in a hundred and he was still not done.

Now, that he has completed the two-year masters in vocal music, he is auditioning for parts along with hundreds of other formally-trained, talented singers trying to make it.

Even with all of his awards and with all of his study, he is paying his rent and his school loans as a bartender.

Today, a trader told me that she was considering giving up trading after four years. She was stalled in her trading and could not decide whether to continue or stop trading.

She had invested four years of effort and was still not done.

In anything as difficult as success on the stage or in the electronic futures market, you have to decide whether to do whatever it takes to succeed or you should find another goal to pursue.

Either choice is rational, but there is no point in half-way measures or partial commitments.

The first step in my “Four Steps to Success in Futures Trading” is to resolve that you will not fail.

In the singer’s case, resolving that he will not fail means that he will give his all to every audition knowing that nearly all will end in rejection.

As a trader, resolving that you will not fail means you decide that you are going to have the discipline to do what you plan without equivocation, without fear and without regret.

Resolving that you will not fail makes you one in a hundred, but you are still not done.

If you would like to receive a copy of my “Four Steps to Success in Futures Trading” just send me an e-mail to jq@fptrading.net.

Wishing you success in your trading, Jeff

If you have resolved not to fail in your trading, you should look into having me as your trading coach and mentor in the Electronic Trader Mentoring Program.

If you would like to hear what other traders, like yourself, have to say about me as their trading coach, check out the testimonials tab at www.ElectronicFuturesTrader.com.

To find out more, e-mail me at jq@fptrading.net and let’s find out if having me as your trading coach makes sense for both of us.

Posted at 3:00 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

12/1/2008

Absolute unconscious discipline gets Michael Phelps his seventh gold medal by 1/100th of a second

I saw the Michael Phelps interview on 60 Minutes, last night.

In the segment (here), Michael Phelps talks about the finish of the race in which he garnered his seventh gold medal in last summer's Beijing Olympics.

The explanation of why he won and why his opponent lost is the story of Phelps' absolute unconscious discipline.

Michael Phelps had it.
His opponent almost had it.

But, almost having absolute unconscious discipline was not good enough in the Olympics and it is not good enough in trading.

In trading, having absolute unconscious discipline means that you will follow your clear, written trading plan, without equivocation.

To do less, means that you will be destined to be beaten by traders with the discipline to do what they said they would do.

It is only a small difference between success and failure.

In Michael Phelps' case, the difference was 1/100th of a second.

It was the difference between the greatest swimmer of our time and someone no one can remember.

Wishing you success in your trading, Jeff

Posted at 4:08 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

11/22/2008

Where is the silver lining?

Last week, the heads of all three US automakers appeared before Congress asking to be bailed out of their impossible financial situation and, then, got back on their private jets and returned to Detroit. Twice last week, the Dow lost 400 points. And, if all that was not enough, Al-Qaida’s number two man emerged from his cave long enough to insult our President-elect.

It is hard to find the silver lining in all the dark clouds.

I remember a time in the late-seventies when I was talking to a neighbor who had significant losses in the stock market. He went through a litany of horrible things happening in the economy, each worse than the one before.

My neighbor, then, asked me how I was doing.

I told him I was having my best year ever.

My neighbor looked at me as if I had just grown a third eye.

I went on to explain that the markets were volatile and that was good for traders, like me.

All of the things that were wrong with the economy had created great trading opportunities and, as a trader, I was doing well in what for nearly everyone else were difficult times.

I am not sure that my explanation made sense to my neighbor, but it was true then, and it is true today.

Uncertainty makes for exciting markets and, today, we have uncertainty in spades.

I know that it is hard to focus on trading today’s volatile markets when we are bombarded with bad news every time we look at the paper, turn on the television or talk to one of our neighbors.

My advice is to cancel the morning paper. Skip the nightly news and do not let anyone explain to you how the world is about to come to an end.

Use the time you would have, otherwise, spent keeping up to date on the latest calamity and take a walk with your wife, chase the kids around the house, or listen to my podcast.

These times will be whatever we each make of them. It does not help to dwell on what is wrong in the world. You can only prosper by figuring out how to succeed given whatever circumstances you are given.

So, there is a silver lining, but you have to find it for yourself.

Now, would be a good time to get serious about your trading and become part of my Electronic Trader Mentoring Program. There are a few spaces remaining in the program. The future is waiting for those who decide to make it what they will. Make 2009 your best year ever.

Wishing you success in your trading, Jeff

Please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124.

Posted at 6:02 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

11/4/2008

Separating the stock index trading day into Quintos

I have always enjoyed having an usual last name. I even liked being the only “Q” in my classes in grade school.

Quinto means fifth in Portuguese, Italian and Spanish.

With Quinto for a last name, I have spent a good deal of time figuring out ways to split things into fifths, or Quintos

I have even divided the stock index trading day into its five natural parts or as I like to call them, the “Quintos of the day”.

Perhaps, even more surprising is that splitting the day in this fashion makes sense.

The reason to spit the trading day into its main parts is that all parts of the trading day are not equal. Instead, each session within the trading day is very different.

In order to maximize profits, each session requires its own strategy.

Some sessions can be very productive, while others are most often not productive.

The five parts, or Quintos, of the trading day are:

The opening - 8:30 AM to 9:00AM Central Standard Time
The morning - just after the 9:00AM economic number to 11:30AM central time
Lunch - 11:30AM to 1:00PM central time
The afternoon – 1:00PM to 2:30PM central time, and
The close – 2:30PM to 3:15PM central time

The opening is a prelude to the day and may reveal much about what is coming.

Liquidity floods into the market during the opening. You should watch the opening to see how the market tips its hand.

The morning, starting just after the 9:00AM economic number, is usually the most productive period of the day. You are naturally most alert during the morning.

I advise traders with limited trading time to concentrate on the morning session.

Lunch starts at 11:30AM central time and is usually a low probability, noisy period when the market marks time until the afternoon.

I advise traders to stand aside unless they have a strong feeling about the lunchtime activity on a given day.

The afternoon is the second best time of the day and, for my purposes, starts at 1:00PM central time. I know traders who work out at lunch and come back from their workout and a light lunch to be ready for the afternoon session.

The close is, well, the close.

Liquidity starts to leave the market around 2:30PM central time as traders close out their positions for the day.

You need to have your day made well in advance of the close. I have often seen traders desperately try to make their day in the last few minutes, mostly to their detriment.

So, there they are.

The stock index trading day broken into Quintos.

Now, that you know that Quinto means fifth, can you guess where my family originated?

If you guessed Quintos, Portugal, you would have guessed right.

Jeff Junior and I visited Quintos, Portugal some years ago and we agreed that Quintos was the fifth dullest town we had ever seen.

Wishing you success in your trading, Jeff

If you would like more information on improving your trading, then my Electronic Trader Mentoring Program may be just for you.

You can hear what other traders, like yourself, have to say about me as their trading coach, check out the testimonials tab.

Please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124.

Posted at 2:05 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

10/16/2008

Two Great Futures Traders

The markets have gone from interesting to bizarre.

Friday the Dow futures had a 1,000 point range.

Monday the Dow was up a record 936 points.

Today, the CBOE’s volatility index, the VIX, reached 80.

We used to think the markets were volatile when the VIX was in the 30’s.

So, with all this in mind, we can agree the market is volatile.

But, what do traders do when faced with this unprecedented volatility?

· Fearful, timid traders hide from today’s markets, afraid to trade.

· Overly aggressive traders just get more aggressive, hoping to be rewarded for their bold, but undisciplined trade.

· Smart traders approach today’s ultra-volatile markets with caution and patience, knowing that their careful, disciplined trade has a reasonable chance of yielding positive results.

Two of my favorite professional traders are examples of just this smart trader mentality.

One trades a fund from his home in the rolling countryside south of London and the other trades his own account in an equally pleasant setting in suburban New Jersey.

Both are gingerly trading today’s wild markets knowing that their disciplined trade will be rewarded as long as they are patient.

Both are nicely ahead for the month of October and my guess is that each will end the month with reasonable, but not outsized profits.

Each is carefully picking his battles, looking to identify opportunities and willing to miss potentially good trades that just do not seem right.

When I first started making money on the floor, I wanted to be a big trader.

I wanted to have huge positions and make big money.

After seeing my account and my blood pressure swing wildly with my oversized positions, I decided that the key to making a real living trading over the long run was consistency.

The two traders, from England and New Jersey, understand this. Each is exploiting the market consistently and each will continue to have success over the long run.

That is why this is the tale of two great traders.

As for me, I am proud to serve as the trading coach and mentor for each of these two great traders.

If you would like to take your trading from good to great, you should look into having me as your trading coach and mentor in the Electronic Trader Mentoring Program.

If you would like to hear what other traders, like yourself, have to say about me as their trading coach, check out the testimonials tab.

To find out more, send me an e-mail to jq@fptrading.net and let's find out if having me as your trading coach will help you take your trading from good to great.

Wishing you success in your trading, Jeff

Posted at 1:15 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

10/3/2008

What will the changes proposed in the financial markets mean for our trading? Part three of my series “May you live in interesting times”

According to the online encyclopedia Wikipedia, “May you live in interesting times” could be an ancient Chinese proverb, a Chinese blessing, or it could be a Chinese curse. It might even be a clever phase made up by a Westerner, sort of a believable-sounding deception. You will have to judge which of these best describes the interesting times in which we live.

As for me, I think that we are living through all of the above, but rather than wax politically, I would like to talk about how the likely changes in regulatory environment may affect the futures and options markets that we trade.

First, exchange-traded futures markets have a long history of appropriate regulation. Today’s regulatory structure includes oversight by the federal government in the Commodity Futures Trading Commission, by a very effective self-regulatory organization in the National Futures Association and by the various futures exchanges, most notable of which is the Chicago Mercantile Exchange.

Importantly, exchange-traded futures have clear transparency, and mark profits and losses to the market each day. Unlike the over-the-counter markets, exchange-traded futures contracts are traded in an open setting where profits and losses are not estimated, but are accurately tallied and paid, each day.

It is, therefore, very likely that new regulations will make trading on US futures markets more advantageous for institutions than the unregulated over-the-counter markets that are at the center of much of the current financial market problems.

This likely increase in liquidity in the already liquid markets we trade is positive for exchange-traded futures and options. Further, the incredible volatility we have experienced in the last several weeks is likely to be tempered. But, if the past is any indicator, we are in for an extended period of higher than normal volatility.

Once again, all this bodes well for trading in futures and options markets.

Also, the likely job upheaval in the investment business will probably mean more second career traders looking to turn their interest in trading into a meaningful second career. These serious, committed traders are exactly the kind of person that the Electronic Trader Mentoring Program is designed to help.

If you are not taking full advantage of today’s exciting markets, perhaps, my one-on-one trader coaching in the Electronic Trader Mentoring Program could help you capitalize on these interesting times.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it.

However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 6:31 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

9/23/2008

How do you trade when volatility explodes? Part two of my series “May you live in interesting times”

Years ago when I was on the trading floor, I remember a day when the market exploded.

The markets had been quiet for many months and all at once on this day the market took off, catching everyone by surprise.

It was an amazing day, not unlike several of the days in the last two weeks.

Just after the close, I looked over at the nearly empty trading pit to see the biggest broker on the floor sitting on the top step of the trading pit with his head in his hands, his elbows on his knees repeatedly saying, “God must be punishing us”.

I have to admit that it was a bizarre day, but I am fairly certain that God was not then, nor is he now, punishing us.

The fact is that when volatility spikes upward traders, even experienced traders, have trouble getting used to the new level of higher volatility.

The same thing works in reverse when traders have trouble getting used to lower volatility when volatility first decreases.

The good news is that, once the volatility increases, markets tend to stay at a high level of volatility for an extended period and, best of all, good traders get used to the higher volatility.

However, until you are adjusted to this new higher volatility:

1. I would trade proportionally smaller than I did previously;

2. I might consider adjusting my loss limit per trade to account for the greater noise in the market; and

3. I would not lose more in a highly volatile day than I was willing to lose in a normal day.

Trading is about is about picking your battles and it is about figuring out a way to be rewarded. You do not need to spend more money in a volatile day in losses than is absolutely necessary.

The smartest traders are the ones who gingerly trade these volatile markets until they have found ways to consistently be rewarded for their efforts.

My partner in Transformative Trading, Ken Gaus, says that this is a great time for making directional bets using options. Options are not my area of expertise, but I trust Ken’s advice.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it.

However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 6:38 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

9/17/2008

Is the money in your futures account safe? Part one of my series “May you live in interesting times”

I woke up early this morning, got ready for my morning run, checked out the Dow and saw that it was down nearly 100 points.

I, then, clicked on Bloomberg.com and saw the top headline saying, “US Takes Over AIG” followed by the headline “Russia Pours Cash Into Banks”. These two headlines were followed by seven other headlines, five of which were nearly as bad and only one of which was modestly positive.

This week, 158-year old Lehman Brothers has gone bankrupt and AIG is being taken over by the government and it is only Wednesday!

As the Chinese proverb says, “may you live in interesting times.”

I have been blessed to have lived through some very interesting times

I could reminisce about the crashes, the failures and the floods I have seen, but, instead, I would like to talk about whether or not your money is likely to be safe deposited with a US-based futures clearing firm during these tumultuous times.

First, a US-based futures brokerage firm, also called an FCM, is not a bank.

Your futures firm does not loan one customer’s money to another customer, like a bank. It is required to mark all positions to the market and account for all of the money from each of its customers every day. If one customer is short money due to trading losses, the firm must put up its own capital in place of the customer shortfall that very day.

Your money at an FCM is placed in specifically identified Customer Segregated Accounts so that your funds are segregated from the operating funds of the FCM.

Second, a US-based FCM is highly regulated.

Each US-based FCM is subject to continuous monitoring by the National Futures Association and the Commodity Futures Trading Commission. If the firm is a clearing member of the Chicago Mercantile Exchange, it is subject to the stringent financial requirements and the supervision of the exchange, as well. Each day, every FCM completes a Segregation Report to prove that all of its customer money is secure.

Lastly, I would only have as much money in my futures account as is necessary to reasonably do the trading I intend to do.

After all, keeping more money in your account than you need makes keeping strict discipline more difficult and it does not make sense.

So there it is.

The money in your account at a US-based futures brokerage firm is likely to remain secure. Keep just enough in your account so that you can trade the size you want, and not more.

That way you can concentrate on these interesting times and not worry about the money in your trading account.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it. However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 3:19 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

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