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How did I learn to trade in a word, experimentation, right? In those days, there was no information like you have today where you can go in. Google didn’t exist. The internet didn’t exist. I know I sound like a broken record. There was no mobile technology. Blackberry hadn’t even come into becoming like a two-way pager that it was before it became the smartphone that it was. There were books and there were people, and I could remember there were a few books on stocks, but they were really written for investors more than anything else. They weren’t really great books On Trading. On Future Side, there was, I can remember getting Jack Sch Swagger’s Complete Guide to Futures. I can remember reading Tools and Jones, the Futures game, who wins, who loses, and why. Of course, there’s Market Wizards in there, which was really the most profound book for me because it showed me that these people were human beings and that to a name, they could all be boneheads. And now of course the rest is history. But that taught me that there was a real human element to this and that everybody market Wizard to be or not, you could still do stupid things, but that was part of the tuition, that was part of the hazing process that you had to go to join this fraternity sorority, if you will, of trading.
So I was ready, willing, and able to lose money so you can latch into a certain asset class because it excites you probably intellectually, right? You can learn about options and all those moving parts and that’s great, but ultimately, as I’ve said before, you have to have the right emotional makeup to be able to trade those asset classes. To me, I wanted as few moving parts as possible, so I put options on the side. It was just too much between all the Greeks and then all the IV and the historical values, historical volatility, excuse me, it was too much for me. You got to remember, I was in a wirehouse and I was trying to also trade client accounts. I needed the commissions and fees from what I was doing and making my client’s money in order to learn my own craft as well, and in order to be able to afford my own bills.
And the prop firms were gigantic New York Stock Exchange member firms, and you needed to go with a proven track record as well as some serious political connections, which I didn’t have in order to get seats on those desks. So to me it was like, okay, the only way I’m going to really be able to do this is the same way I kind of learned how to be an artist first with my, I had pastel chalks and I’d steal my mother’s. I wouldn’t steal it, but I’d use her final net hairspray because when you’re using the chalk, you got to pat it down because it’s hard to blend colors. It just kind of blurs, so you kind of have to spray it down. Long story short, and then I got into paints and all that. I was about 14 years old, but all of that too was experimentation right down to mixing and blending colors.
I used to not buy black. I would make my own, right? And if you’re an artist, you would know why. So you need to feel comfortable with experimentation. You can definitely backtest to have an idea, but the real education is going to be from, and this is about me and how it can help you. I had to be ready, willing, and able to lose real money because in that process, you get to calibrate your behavior with what There has to be an element of risk. It’s too safe paper trading, and I know some of you’re like, I don’t give a shit. I’m going to do it this way anyway, and I don’t blame you because it’s too easy to lose. It’s too easy to lose money in good markets, right? Nevermind choppy markets. There are some caveats too. Some of the places, if you want to learn swing trading and day trading, you can learn to do it, but you can only use one instrument at a time, and I think the data only go back for approximately two years.
So I don’t know how robust the rules are. You’d really want to show and try to trade, I don’t know, maybe four or five dozen different names with those same scalping rules to see if it would make sense, because you could sit there and change enough of the parameters in your back testing engine to make anything look good. The proverbial putting lipstick on the pig. I wanted something that was much more robust that had very, very few parameters on it so that it could stand the test of time. So that’s why I kind of designed stuff by myself, which was very hard to do. It was extremely hard to do and was extremely time consuming. I had to do it all by hand, and so I would mark to the market these positions, then add them all together and create my open trade equity. Then what was my collective drawdown?
And it just took hours and hours and hours, but there was really no other way to do it. Then I got good at it and I learned shortcuts and I could run macros and then I could import the data and keep that in a database. I think it was a Fox Pro database because the hard drives at the time, they didn’t even have 10 megabytes, which it’s really amazing that you could get anything done. But I learned my craft from the experimentation, you could call it scrimmage. They were against teams that weren’t in the league, but everyone was going live so that you could run plays with people who didn’t know to see if there was efficacy. You still got tackled, right? You still got hit with pucks, you still got know how to hit if they pitch you backwards, the whole kind of deal.
So it doesn’t matter what sport it is. It was a good environment to really learn your craft. And so for me, I was the center, so I just hid the guy in front of me. For the most part. It was a little difficult if we did shotguns or what have you. I had to look, so I had both my head and my hands between my legs, which is not typically a masculine position, so I had to be super quick. But at any rate, it was through the repetition and the willingness to risk real money that helped me calibrate my behavior. And again, that means learning what to do, but also learning what not to do. My cash was so tight and the commissions were so high, I really had to learn to figure out what the bad habits were really quickly because it became very, very expensive. You have to remember, it cost me 50 cents.
It could cost me almost 1% of my account just on transaction fees because there was no, in the decimalization led to Robinhood where they’ll basically trade against you. You might be losing money and getting collared or being a victim of their high frequency trading, so they’re still making money off you, maybe even more than if they charged commissions, but you don’t see a commission on the bill. That’s the whole thing. So that can seem appealing, even though the people who are clearing your trades aren’t necessarily doing you any favors. No one’s doing anything for free. That’s Milton Friedman, right? There’s no such thing as a free lunch tan staff. So it was the willingness to lose money if you really want to get down, and the feelings of losing money, realizing that I could lose money ongoing for quite some time before I got a damn clue.
That’s very unnerving for a lot of people because again, there’s no one there to validate you as a trader. There’s no one there to tell you you’re doing the right thing, and there were no back testing engines. It was really barren. It’s a miracle in many ways that I even made it. But the thing is, is that if you can find it within yourself, that’s why I always say don’t risk a lot of money, risk 10 bucks, but risk real money and learn your craft. Learn to take risk home overnight over the weekend because when markets are really moving in your favor, you can definitely make more money for not doing any work, which to me is the ultimate. That was my ethos, is I wanted to come in and leave blue collar despair behind me. I had only known day player kind of jobs where I’d go to work and I’d get paid. I wanted to learn intellectual property where I could figure out a math model. There’s that, and that comes from being just a super dweeby, nerdy kind of kid where I would keep track of temperature, humidity, batting averages, records, Yankees and Mets, red Sox. I’d keep all a LE statistics because yeah, I’m from New York, but I just also appreciated really good baseball. So I’d keep track of what

Pitchers through, did they pitch a guy backwards? Did they start him off with a curve ball? Did they pitch around certain people and what pitches did they throw? And I’d keep all that inner game to kind of think of the model. How could I learn from other people’s behavior who, especially if they were very, very successful. So I think it’s like being creative. It wasn’t being locked into any one particular chart pattern. Again, I showed you the rules or the exact stuff that I did. If you go back and look at the live replay of the live stream, that was exactly how I was thinking. And so when people say, well, you keep talking about looking at the data and not looking at charts, what’s the example? Well, that’s the example. I was looking at the data, seeing how I could maximize my efforts because I knew if I made 500 bucks or $500, then that was 10% rate of return on my account.
And that seemed like all the world to me because then I kept thinking about, wow, what did I have to do when I was working as a golf caddy or as a waiter to make that money? But those were important lessons to learn because then it helped me learn good habits, especially learning how to sit on my hands. And I’m saying that it was easy taking a drag on my smoke, but I can remember going to bed being really nervous. I can remember having sleepless nights. I mean, I never threw up or anything, but I can remember it being very, very challenging because the level of uncertainty was ginormous. Plus, you have to remember, if you watch the live stream, I was using 5K and breaking up my money so that I was trading somewhere between 40 and $50,000 worth of notional value. And I go over why I was thinking that way and why I was doing what I was doing. So there weren’t books I didn’t run to kind of suck on mommy’s nipple. I just said, this is something that I got to do on my own.
It is really something that I have to do on my own. I have to learn how to think for myself. And that made all the difference because I learned to be self-sufficient and not rely on other people. So some of you might be in some of these online programs and this and that, more power to you. My whole thought process with those though is that if you haven’t learned everything that you need to learn within two to three months, there’s probably not a whole lot of new stuff you’re going to learn going forward. So take what you need and then leave the rest. But again, I feel like as if I do any coaching or mentoring, if I’m doing a good job, I make myself obsolete. I don’t want to have people ongoing. There’s may be one or two people who run over nine figures that like the accountability. That’s a different story. They’re very well advanced, so to speak, or at least career wise. But for the most part, for those of you, you have to learn how to push

The birds out of the nest. I don’t want to be talking to people every day if they’re within five years of trading experience, because ultimately the answer to all their questions are try it, see if it feels good, see if it makes money back, test it. See if it has positive expected value. And if you’re looking for super performance, A, it’s usually going to take a whole lot of leverage. And two, you have to get basic consistency first before you can start thinking about super performance. So I think it’s kind of disingenuous to start talking to rookies who have no experience, who don’t know their asses from a hole in the ground, and you’re trying to talk to them about becoming Bruce Covner in two months. It’s not practical. If it works, great, but I don’t know anybody in 36 years who just stepped out of mom’s womb, so to speak, on Wall Street and just killed it from day one. It doesn’t typically work that way. You have to find your way and enjoy the process. So if you’re impatient, this might not be a good fit. If you’re stuck though, you know how to reach out to me, reach out through the blog and I’ll try to point you in the right direction.

The post How I learned to trade first appeared on MartinKronicle.

The post How I learned to trade appeared first on MartinKronicle.