The author of the book Eddie Toppel has an e-mail newsletter that is free, I will post it here for those who don't get it or don't want it or just want to look at it.
Coz
Samurai Trader's Email Digest Issue #23 January 9, 1999
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Welcome to the Samurai Trader's e-mail Digest. This weekly digest
features questions from readers of the book, Zen in the Markets. Answers
are provided by the book's author, Edward Allen Toppel. Investment or
trading questions unrelated to the book will also be considered. Last names
and email addresses of those submitting questions are not listed so that
total confidentiality is maintained. For details, visit
<http://www.samuraitrader.com>
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TABLE OF CONTENTS
*Moderator's Comments
Samurai Trader's Email Digest To Go Bi-Monthly
*The Topics of this Week's Questions from Subscribers
1. Trading Each Tick??
2. What is your mantra?
3. Buying Breakouts?
4. Are you going to publish the survey results?
5. Why do you publish this digest?
*Closing Thought
Where were these guy's priorities? Where are your's?
______
MODERATOR'S COMMENTS
First, a very happy and healthy 1999 to one and all.
My personal workload for 1999 has forced me to publish the SamuraiTrader's
Email Digest on a bi-monthly schedule beginning with issue until further
notice. This will also allow me to put together a more content rich digest
with a wider selection of topics. Toward the end of February, I also hope
to provide an archive of previous issues that will be available from my
website <http://www.SamuraiTrader.com>.
This past week's market further reconfirms the SamuraiTrader's approach to
all markets. Anybody long Amazon.com out there? Could you have bought a
stock with no earnings, losses for the past several quarters, and a P/E
ratio thru the moon?
Just a few short weeks ago an analyst predicted that Amazon would sell over
$400 a share and everyone laughed. Pre split, it did last week and
probably quicker than that analyst had anticipated. Actually, it went to
almost $600 a share on Friday. The point being that you don't have to
figure it out, all you have to do is accept what you see. No EGO!!
If you thought the market, you probably didn't or couldn't buy a quickly
ascending stock or futures; but, if you simply went with the flow (no
questions asked) you could have made your entire year already. I am
driving home the point once again that all you have to do is agree with the
market, jump on, and enjoy the ride whether that direction be up or down.
When your brain is driving the bus, it's tough. Futures traders this week
also had a spectacular ride. Don't think about it, just accept and act.
Make that your resolution this year
_______________
THIS WEEK'S QUESTIONS
Q.1
Eddie,
I was reading through your latest digest issue.There was one question
where the answer carried a statement from you that trading each tick is
impossible while I have been trading each tick for the last two years now.
Eddie,if we do not trade each tick then how come we are in the flow of the
market.Deciding about a switch parameter will only involve our own mind
which will in turn create its own flow.This is what the ego's trap is.
Suppose after deciding about a switch parameter,we enter into a position
and the position gets into loss but still not enough to trigger
switching,what do we do. WAIT!. This will surely induce weakness into our
system.The mind will overpower us with its two big traits, HOPE & FEAR.Any
waiting will jam the trader's decision making power and we will only keep
on talking about the descipline which the mind will never allow the trader
to follow.
In fact what I feel is that the approach that you taught me and the each
tick trade that I do has created a sort of immunity within my system of
taking small losses.The losses,since I keep them small always,does not pain
me at all.And my whole body comes into my rescue if the mind ever starts
talking about waiting and hoping.I get drenched with sweating and the
breathing gets hard to harder with each tick missed.
Eddie,I like you when you talk about the numbers 27,28&29 in your book
and taking decisions on them.
Regards.
Rajan from India
A.
Rajan,
More power to you if you can trade each tick. I can't but my definition is
different than yours. And, I agree with some aspects of your EGO analysis.
Commissions and slippage will kill you in the US.
I have stated in my book that you can define a tick any way you want.
Stocks used to trade in eighths in the US. Now they have gone to
sixteenths. The tick has been redefined. However, you can make it
whatever you want. I agree that is arbitrary and ideally we should go with
each tick as that is the flow and we want to be flowing in the right
direction. Again, I said that the tick/switch parameter is arbitrary and
that this is an art which makes it impossible to put a hard and fast answer
to switching. I think that Chuck's experience in the next question pretty
much sums up the pluses and minuses of this approach.
I have always said that this is the worst possible approach to the market
except for anything else. Nothing works all of the time.
Eddie
*****************
Q.#2
Dear Eddie:
I am struggling with the "buy em when going up, sell em when going down"
method. I'm enclosing a brief description of what I tried to do,
without monetary success.
I have tried to sell every 1 point down move and buy every 1 point up
move. I have good profits on the giant moves, but loose it all on
choppy days. On the big S&P contract a one point move is $250. What I
have done is to enter the market arbitrarily 15 minutes after the open
in the direction of a 13 bar one minute Exponential Moving Average.
This is arbitrary, since I have to get in somewhere; then I buy one
added contract to go long if the market moves up. So, assuming an entry
position at 1185.00, I add one contract at 1186.00, add one more at 1187
.00 and so on, if the market moves down I sell one. Obviously I get all
chopped up when the market is congested and not moving consistently in
one direction. When I have five contracts accumulated long or short, I
close the trade at the last price and start all over again. I would very
much appreciate your suggestions regarding when to buy more, sell and
close out the positions. Do you close out every night? Do you close
out during the trading day? Your ideas will be greatly appreciated.
Everybody tells me this methodology can not work, but I think this is
what you are doing in general, is it not?
Thanks,
Chuck from Denver, CO
A.
Chuck,
I know your frustration. The problem is that trading is not a science but
a art that also has aspects of luck needed to be successful. Nothing works
forever. An approach may work for a while but then the market character
changes (gets choppy, goes straight up or straight down).
This is where the art comes in. Some people sense the changes before they
happen, like good dancers. Other realize that the character of the market
has changed after they've run up a streak of losses that was proceeded by a
string of winning days. There are no formulas, just a lot of discipline and
a little luck thrown in.
I believe that switching is the only way to stay in the flow and keep your
EGO from taking over. The market dictates everything and not your EGO.
The major question is when to switch, how much movement against you before
getting out and reversing. Rajan switches with every adverse tick. More
power to him. If he ever got into a market that just chopped up a tick and
down a tick all day, he's be out of business in no time. And, there are
periods when the markets doe just that. Most of the time it doesn't.
A wider switch parameter allows greater profits but also gives greater
losses. In straight line moves, it's wonderful. By your note, I see that
you have experienced it.
This is the hardest thing about trading. There are no SOLID rules to hang
your hat on yet people keep looking. Going into the game, you have to
accept this fact.
I know this in no consolation, but every trader I know has gone through
what you are experiencing. It just comes with the territory.
Eddie
****************
Q.#3
Dear Samurai-Trader,
I've enjoyed reading your book again and again. However, the one element
not present in your book is "What is the song one should sing when focused
as a "soes trader" on a level II computer screen.
I have been both a floor trader on a futures exchange and an off the floor
position player of the oex. While on the floor trading the song my mind
would sing was the different values between the several futures months of
the same commodity. In Platinum my mantra (if you will) was jan - apr
$2.00 bid at $4.00 jan jul $5.00 at $7.00 etc. This song helped me focus
and gave me reason to bid against other bids in different months. If Jan
was $300 bid and the Jan Mar spread was $2.00 @ $3.00 I would bid $302
for mar against the $300 bid for jan.
When trading the oex my mind would sing the ratio song - if I had a
backspread on ie:if short the jan 500 oex option and long 3 jan 510 options
I would sing - how many 500's should I have on versus the 510's. That is
how many 510's could I buy for every 500 I could sell such that I would be
able to buy at least 3 for each 1 I sold. In this situation I had an
opinion (market direction) and sang the song to optimize my profits if the
market traded in that direction and to minimize my loss if the market
traded against my opinion.
Now I am trying to learn to be a soes trader. Here I have no opinion as to
direction and no relative value against some other month. If I buy ORCL
then my fortunes lie with the immediate movement of ORCL. However, I need
some song to sing to get me to enter the trade. Otherwise I watch Orcl (or
what ever stock is in play) and I have no reason to buy or sell. I need a
song to sing ie: a reason to act. You said in your book 27 - 28 - 29 the
market is going up / it is ok to buy if the market is going up. So, do I
sing the last three ticks and move based on the direction of those last
three ticks. Or, do I sing the movement of the S&P 500's last three ticks??
(Some successful soes traders at the shop where I trade play - if the S&P's
are going up buy the strong stocks in play. If down sell the weak stocks,
etc.)
By the way, if I have no song to sing my mind tells me all the reasons not
to act. If I go long the market will crash. If short the company will
announce the cure for cancer. I'm sure you've dealt with the same
cacophony of noise. So, is there a song(?) or where is the focus. Or is
it just buy (or sell) and if your right press and if your wrong get out????
Thanks for your time. I'm struggling to learn this soes game and could use
some clear thinking.
Herb B. from NYC
A.
Herb,
I understand your problem. I will tell you what most trader's mantra
(song): "God, If I ever get out of this situation, I'll never do it again".
The trick is to keep your mind free of all thoughts so as not to let that
evil voice come out and project it's machinations onto the unfolding
market. My own technique used to be too focus on my breath. Just focus on
your breath and you'll be aware of what is going on around you as well as
what the market is doing. It helps to shut out the
voice of your EGO***
Eddie
***************************
Q.#4
Eddie,
When will the results of the survey that you sent in the last issue be
published?
Diane from Del Mar, CA
A.
Diane,
First, I want to thank everyone who sent in their survey. I really
appreciate your quick responses.
I am going to publish the results in the next issue on January 23.
However, I am only going to send the results out to those who responded to
the survey. So, if any of you out there hasn't responded to my survey,
I'll give you another chance. My cutoff date to receive you answers will
be January 16, 1999. I need time to compile the results. Here are the
survey questions again for those who are new to my Digest and to those who
trashed the last one and wish to respond. Just fill it out and click reply
on your email program. It's that simple!!
SURVEY
1. What websites do you visit often?
2. What newsgroups are you members of?
3. If you were me, how would you market this newsletter and my book?
4. Do you enter your orders electronically (via the web)?
5. Do you trade the S&P Stock Index Futures contact in either the full or
emini version?
6. What are you paying for a round trip?
7. What markets do you trade? Stock or futures or both and which other
markets?
8. What other features would like to see in this Digest?
*****
Q.5
Mr. Toppel,
Why do you take the time and effort to publish this free Digest? What are
you getting out of it?
Bill G. fro Barrington, IL
A.
Bill,
I am glad you asked.
I write this digest because I know that trading is a lonely business and we
all need to share our pains, questions, anxieties. I also like to share my
vast experience with others as I know when you are just starting out in the
trading and investing world, it can be pretty scary. I also do not like a
lot of the bs that is offered newbies. I believe that my approach will
shorten your learning curve in this cruel, exciting and unforgiving business.
My economic motives are that I hope that you buy a copy of my book from my
website for yourself or a friend, attend one of the SamuraiTrader's
Symposiums that I do occasionally, and become a client of mine if I ever
decide to act of a broker.
Thems my reasons.
*****
FINAL THOUGHT
Check your priorities. These guy's didn't!!
I found this piece years ago and thought that it was a sobering reminder
about the place on money in our lives.
In 1923, a very important meeting was held at the Edgewater Beach Hotel in
Chicago. Attending the meeting were nine of the world's most successful
financiers.
Those present were:
The President of the Largest Independent Steel Company
The President of the Largest Utility Company
The President of the Largest Gas Company
The Greatest Wheat Speculator
The President of the New York Stock Exchange
A Member of the President's Cabinet
The Greatest "Bear" on Wall Street
Head of the World's Greatest Monopoly
President of the Bank of International Settlements
Certainly, we must admit that here were gathered a group of the world's
most successful men. At least men who found the secret of making money.
Twenty five years later, let's see where these men were:
The President of the Largest Independent Steel Company-Charles Schwab-
died broke and live on borrowed money for five years before his death.
The President of the Greatest Utility Company--Samuel Insull--died a
fugitive from Justice and penniless in a foreign land.
The President of the Largest Gas Company--Howard Hopson--is now insane.
The Greatest Wheat speculator--Arthur Cutten--died abroad, insolvent.
The President of the New York Stock Exchange--Richard Whitney--was
recently released from Singsing Prison.
The Member of the President's Cabinet--Albert Fall--was pardoned from
prison so that he could die at home.
The Greatest "Bear" on Wall Street--Jesse Livermore--died a suicide.
The Head of the Greatest Monopoly--Ivar Kruger--died a suicide.
The President of the Bank of International Settlement--Leon Fraser--died a
suicide.
All of these men learned well the art of making money...but none learned
how to live!!!
Start this year off right and reconsider your priorities.
That's it until January 23.
Edward Allen Toppel
P.S. You can order your personally autographed copy of Zen in the Markets
thru my direct order page at <http://www.samuraitrader.com/order.html>
*****
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The Samurai Trader's email Digest is a production of Samurai Press,
Highland Park, IL.
All opinions expressed in the answers provided are those of Edward Allen
Toppel and are not meant to endorse, condemn or in any way guarantee any
of the investment or trading opinions or decisions discussed.
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