August 1, 2001 TMTT Trader's Circle
Special Guest Speaker Doug Zelesky
Wed, August 01, 2001 at 16:42 <brandon> We are very happy to have Doug Zalesky as our guest today. Doug is a respected veteran of 15 years in the futures industry. He started his career as a clerk for Goldberg Brothers right out of college. He was mentored by some of the biggest bond traders of the 1980's including Charlie DiFrancesca and John Moore (who funded his initial trading account). His trading experience includes trading stock index and bond futures at the Chicago Board of Trade and the London Intern. Currently Doug is a partner at Elocaltrading.com, an online futures broker offering access to all CBOT, Eurex, LIFFE and CME contracts at the best price on the street. In addition to the lowest available prices, elocal has some of the best costomer service around. You can get more information about Elocal at their site, www.elocaltrading.com, or by calling Doug @ 312 341 3091. So, without further delay, let's welcome Doug to the TMTT Realtime trading room! Thank you for being here with us Doug!
Wed, August 01, 2001 at 16:43 <doclevel2> welcome Doug
Wed, August 01, 2001 at 16:43 <doug1> Welcome everyone! Before I begin, I'd like to talk a little bit about mentoring. Trading is a lonely exercise. You are sitting there at your screen usually with no one else to talk to, whether it's about trade entry points or exit points or about the behavioral aspects of trading. It's nice to be able to have a Coach, someone like Brandon who can help you in your trading endeavor. I was lucky enough to have a mentor in the early days of my trading career and if you guys had one I know that it would help you as well.
The title of this seminar is "THE MARKET PAYS YOU TO BE DISCIPLINED"
Discipline involves playing by the rules. I guarantee that your trading will improve if you try to follow the rules of trading. Before we begin to discuss the rules I'd like to talk a little bit about the wheel of success as it relates to trading. There are three spokes in the wheel.
The first is content. Content is all of the external information and internal market information that you utilize to make your trading decisions. All traders must purchase value added content. Teach me to trade is a good example of external content. Quotes and charts are an example if internal information .
The second spoke is mechanics. Mechanics is how you access the markets and the methodology that you use to enter your trades . You MUST master mechanics before you can succeed as a trader.
The third and most important spoke in the wheel of success is DISCIPLINE. You must attain discipline if you ever hope to achieve any level of trading success. Discipline must be practiced 100% of the time. Every trade....every day.
I learned the rules of trading twenty years ago from the best trader ever to set foot on the floor of the CBOT grain floor. His name is David Goldberg. Dave started out in the business just as I did, clerking then trading and finally owning and operating the largest clearing firm at the CBOT, MERC and CBOE exchanges.
I went to work for Dave as a clerk, counting traders cards. I would count each trading card both the buy side and the sell side and total up a trader's trades and make sure they matched the computers count. What I quickly came to realize was that all traders pretty much trade the same way. At least pit traders. I categorized traders into four groups:
1. The superstars, those making thousands of tics a day. A tic is $31.25.
2. Those that were making a living.
3. Those that were just surviving.
4. Those that busted out.
Perhaps some of you can place yourselves into one of these categories. The only difference between the groups was not in the way that they traded because they all pretty much did the same thing........ they bought it at 5 and sold it at 6. It was the size of their trades that distinguished the superstars from the just making a living guys. The one constant that ALL of the traders had, except the bust out guys, was that they had discipline. They never let their losses run. They never took too much out of a trade either. They were not greedy. It was pretty much one tic up and one tic down.
So that's how I conducted myself in the Pits. I learned the rules of the game and I followed them for 13 years, everyday. I wasn't the biggest trader in the Pit, but I consistently made money, usually 30-50 tics everday. I'm not a great fundamental trader, nor am I a good chartist. I know how to get the edge on a trade and then manage it with extreme discipline. That's it.
I'd like to present to you a list of the RULES OF TRADING. I did not make up these rules myself. I don't have a copyright protection on them. They have been around for 150 years. So....let's begin:
ALWAYS LOWER YOUR TRADE SIZE WHEN THINGS ARE GOING POORLY FOR YOU.
There's no reason to keep trading and losing money trading 5 lots when you could be losing money trading 1 lots. Always lower your size until you get your confidence back and you start posting winners again. This rule will save you tons of trading equity.
NEVER TURN A WINNER INTO A LOSER
What are you thinking? The market has paid you for being correct and now you want to get greedy? I see this over and over again. Be happy with what the market gives you. Move on to the next trade.
THE MARKET PAYS YOU TO BE DISCIPLINED
I tell this to my traders over and over again every day. When you get up in the morning and you're taking a shower say to yourself " I will make money today as long as I play by the rules." Remember.........discipline is like claiming to quit smoking. You can't claim to have quit and then sneak one every once in a while. It's every trade every day; every month every year. Don't claim to be disciplined if you're disciplined 9 out of ten trades. You are not. Every trade is unique to itself. Don't worry about your last trade or that you're down money for the day. Make the trade in the present tense........and MANAGE IT!
DEVELOPE A METHODOLGY AND STICK TO IT
Trading is like being a bricklayer. A bricklayer does the same thing over and over again. He doesn't change his bricklaying style from one hour to the next. You should make the same type of trades OVER AND OVER AGAIN.
YOUR BIGGEST LOSER MUST NOT EXCEED YOUR BIGGEST GAIN
This is true for the day, month and year.
BE YOURSELF.........DON'T TRY TO BE SOMEONE ELSE.
Sure I'd like to trade like Tom Baldwin. I'd like to have Baldwin's P&L But if I tried to trade like him........trading 1000 lots, I would have blown up years ago. Stay within yourself. My trade size was only 5-10 lots, but I made a hell of a good living trading 5 and ten lots.
YOU ALWAYS WANT TO BE ABLE TO COME BACK AND PLAY THE NEXT DAY
Don't allow youself to have such a bad day that you run out of all your equity and your clearing firm shuts you down. It sounds stupid, but I've seen it many times. People do really dumb things when they are down a lot of money.
EARN THE RIGHT TO TRADE BIGGER
If you can't trade a one lot successfully, what makes you think that you can trade a 5 lot? Once you master 1 lots.........move up to 2 or 5 lots.
GET OUT OF YOUR LOSERS
Sounds simple right? I can't tell you how mant people hane not masterred this rule. It's very simple.........you are wrong ........get out! THE FIRST LOSS IS THE BEST LOSS. THE FIRST LOSS IS THE QUICKEST LOSS. DON'T HOPE AND PRAY. Once you begin to hope and pray on a trade, you should have gotten out a long time ago.
DON'T WORRY ABOUT NEWS........IT'S HISTORY
If your depending on CNBC for your trading decisions...........you are seconds too late.
NO ONE IS SMARTER THAN THE MARKET
Learn to respect the market.
DON'T SPECULATE...IF YOU DO YOU WILL LOSE
Learn to take small scalping trades.......you'll do much better.
LOVE TO LOSE MONEY
I know this sounds weird, but it's ok to lose. Everybody loses. Manage your losses and move on to the next trade
IF YOUR TRADE IS NOT GOING ANYWHERE IN A GIVEN TIME FRAME IT'S TIME TO EXIT
There is no capital flow to push your trade higher or lowere........so.......get out.
NEVER TAKE A BIG LOSS. ONLY A BIG LOSS CAN HURT YOU. MAKE A LITTLE BIT EVERYDAY
I like to talk to my traders about digging ditches. If you make money one day why give it back on the next? It's like digging a ditch and then filling it right back in. You can't book your money for Monday until you make money on Tuesday.
DON'T TRY TO HIT HOME RUNS, HIT SINGLES
Cash traders die for 1 basis point. One basis point equals 4 bond futures tics. What makes you think that you deserve more than that? Singles are great. You'll strike out a lot if you try to hit home runs.
CONFIDENCE AND CONTROL IS ESSENTIAL
If you lose your confidence just turn off your machine you'll save yourself alot of $.
IF YOU WALK AWAY FROM THE DAY WITH 60% WINNERS AND 40% LOSERS .........YOU'LL ALWAYS MAKE MONEY AS LONG AS YOU MANAGE YOUR LOSSES WITH DISCIPLINE.
DON'T OVERANALYZE
DON'T PROCRASTINATE
DON'T HESITATE
IF YOU DO .........YOU WILL LOSE
REMEMBER.............ALL TRADERS ARE CREATED EQUAL IN THE EYES OF THE MARKETPLACE. IT'S THE MARKET ITSELF THAT WIELDS THE ULTIMATE SCALE OF JUSTICE.
I hope yout took a little bit out of this short presentation. Remember, the market will ALWAYS PAY YOU TO BE DISCIPLINED. If any of you would like to get ahold of me to talk further about trading or to get an outline of the seminar or are interested in trading futures, please call me at 312.341.3091 or on my web-site at www.elocaltrading.com Thanks for listening. Any questions? |
