Damn... Do I have a lot to learn.
To: Jenna (63174 )
From: Tastes Like Chicken Friday, Sep 24 1999 10:20PM ET
Reply # of 63280
I appreciate your response. I hope it is OK if I respectfully disagree.
If I may, I'll tell you why.
First, to me, gambling and trading are two different things. I'm a bit of an anachronism in this area, I've never been to Vegas, I've never pulled the handle on a slot machine, never played cards for money, never bet on a football game. I don't mean that I *avoided* it, I just never was very interested in it.
You bring up an interesting point, however. Many, if not most, people look at trading the stock market, especially short-term (less than 6 months) plays as "gambling". When I was training day traders two years ago, the broker at the firm I was working at, himself a *very* successful day trader, insisted that "everyone knows it's gambling".
I did not bother to argue with him. He had spend 4 years and about a quarter of a million dollars working on his own strategy. He has stuck it out, and he had eventually started making money. He now makes about a million dollars a year, and he trades 2 or 3 days a week, part time during the day.
But I didn't like his style. Once in a while, he would get caught on a short squeeze and take a very nasty loss. I'm talking fifty or sixty grand. Now, if you are playing with 3 or 4 million, and you know you can eventually make it back, I guess maybe you can justify taking a fifty grand hit. It just seemed to me that a fifty grand hit could turn into a half a million dollar hit some day just by accident. I'm not ridin' that bus, thanks.
The truth is that a fifty grand haircut would put the majority of ordinary day traders out of business. It would cause them to change what they were having for dinner, or what they talked about with their spouse that night.
And that is gambling. Gambling is when you don't know what is going to happen, like you said. You pull the handle and you take your chances. The problem with a short position, as opposed to a slot machine, is the slot machine can't take all the money you have in your wallet and then send you a bill for some more money that you don't have.
I watched a very professional player lose over a hundred thousand dollars last summer. He was shorting a hot stock as it ran up. He just happened to be on the wrong side of the trade, and he just happened to keep adding to his short position as it ran from 4 bucks up to 33. When the bell rang, he was out of business. He was a pro, he did this for a living, and walked out the door that afternoon down over a hundred grand. A wife and 4 kids, and he was broke.
And he was a good trader, a professional trader. A sharp guy. He made it back, he is still trading. But he had to borrow a few bucks to stay in the game.
I watched another pro one time take a position trade on a stock he knew was going to run to 14 the next day. He bought the stock late on one day, 10,000 shares, at 8. He was sure of the trade, he "bet his whole roll on it" (his words). The next morning the stock opened at 9 1/2 and slowly ran to 13 1/8. I was sitting next to him. As it was running up, I bought 2,000 at 10 7/8 and bailed out at 12 1/8 in about 15 minutes. He sat and watched. The stock topped at 13 1/8 and started to back off. He was up *fifty thousand dollars* on a forty thousand dollar "bet".
I said nothing. I wanted to tell him that maybe he should trim his position a little, but the man was a pro, and I don't tell other pros what to do unless they ask me. He KNEW it was going to 14. He had his order out at 14, and that's where the stock was going, no ifs ands or buts.
But it was not to be. The stock fell, and fell and fell back to 8, and then it went to 7 and then 6, then 5, then 4, and then 3, and then he sold it. You would not have believed it unless you saw it, that this could happen to a pro, but I saw this with my own eyes.
That was the last day I ever saw him.
I watched a professional woman who had take two courses in trading and was following a system that made pretty good sense get wiped out on the third day she was trading live by jumping on an IPO. She was not aware that IPOs were not marginable. She sat and watched her sixty grand turn into ten grand before she even understood what had happened. She didn't cry, she didn't get pissy, but she was not happy. Fifty grand is a lot of money to lose in half an hour, no matter what you started with.
And I'm not telling you about the morons that never did understand what was going on.
And I am not presuming to tell you how to trade, or how to run your business.
What I am saying is this:
I don't need a computer program to tell me when to buy and sell. I don't need MACD, I don't need RSI, I don't need stochasic, I don't need Point and Figure or Candlesticks or Money Flow or anything else.
I'm a *bad* mofo pro. I'm not bragging, I'm talking straight. The people who are coming up against me should know who I am. I'm no dummy, and I'm out to take their money. I'm the best dang Technical Analyst I ever did meet, yeah. All I need is a piece of paper, a pen, a calculator and a straightedge. I make money just about every single dang day I trade. And I ain't alone. There's a bunch of guys like me, and we all have the same goal.
And I *never* gamble.
When I get set to take a position in a stock, I know where my entry point is before the stock goes there. If the stock doesn't go to my entry point, then I don't do the trade. I also know where my exit is, right or wrong. I know this before the stock hits my entry target. I know that if I do get hit on my entry, and it goes the wrong way, where I am out. And I don't lose more than $300.00 bucks on the trade. My risk factor is factored in dollars, not in fractions.
And I know where I am going to get out if the trade goes the right way. I know before I have the position where I will get out if I am filled and it goes right.
I know these things because I don't gamble. It took me 14 years and cost me fifty thousand dollars to teach myself what I do. Four years ago, I set a goal to figure out a successful short-term trading strategy, and 9 months ago, I did it. This is business. I think most gamblers are idiots, not because they gamble, but because if they don't look at it like it's a business, they lose every damn time.
And if somebody were paying me to help them, there are a couple of things I would personally make sure that they understood.
(And once again, this is just me.)
First, under some specific circumstances, it is possible to know which way a stock will go. These circumstances occur every day, market up, market down, "it don't matter which". It IS POSSIBLE, and I can prove it. If you don't think it is possible, if you think trading is gambling, then I absolutely guarantee that eventually, I will take your money. Because that's my job. Nothing personal. It's business.
Second, if you create your own personal discipline and rules, so that you avoid losing money due to whatever personal peccadillo you might have, then you will reduce your chances of failure to a great degree. Use whatever help you can, get whatever tips you can, but make your own rules and follow them, because if you don't know your own weak spots, I will see them eventually, and I will take your money.
Third, you can't trade like someone else and be successful unless you are doing the *exact same thing* at the *exact same time* as somebody that is really good at trading. And to do that, you have to be sitting next to the guy and have the *exact same* strong points and weak points, and that just ain't happening. Nobody but you knows what your strong and weak points are. Everyone is different. The degree to which you give up control of your trading is the degree you are saying you cannot discipline yourself. If you do not have discipline, and do not follow your own rules, then I will take your money.
Fourth, if you feel like you can take a hit on a trade because you are up already, if you feel you can increase your risk because you are up on that last trade on that stock, or you are playing with the house money or somebody else's money, so it really doesn't matter, then eventually I guarantee I will take that money away from you, no matter where you got it.
Fifth, if you feel the need to justify a bad entry point on a short by thinking you can take some extra heat, or if you think that you can double up and eventually make the trade work, or if you make a habit of shorting Nut stocks at the all-time-high, then some day you will be wrong, and I will eventually take all your money.
Sixth, if you make three losing trades in a row and don't figure out why, and keep trading, I will take your money just a little at a time. If you can't consistently make five winning trades in a row, then you will pay me for your lessons, or you will pack up and go home. Either way, I make money.
Seventh, if I am trying to help people learn to trade, or make money, I tell them my entry point, my risk factor, and my target exit right up front, or I just don't tell anyone what I am doing. I want to help them so they might understand a little better how to learn to do it themselves. I don't need to jive people. I can call a top two days before it happens within an eighth. I have no need to jive talk anybody. This is business. I want to help them understand how to win. We all want to win. There is no way to win when you don't understand the game, unless you just happen to pull the right slot machine handle at the exact right time.
Yes, it's hard. Yes, it's tricky. But it can be done. I did it. Other people can too. Some people can't do it. Big deal. So what? Who cares if you can't day trade. The only person that really cares is your wife or husband or kids if you screw up.
I like to help others by showing them things they can use to learn, so they don't get cremated in the middle of the learning curve, like not going short on an Internet stock that just hit an all-time high on Friday and closed at the top of the day's range after a nasty short squeeze the day before.
Why not just pour some gravy on your hand and drive over to the dog pound and shake hands with Spike the Pit Bull. Much less risk.
If they don't want to listen, then that's fine. But at least they had a chance.
Best regards,
TLC
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