Trader Talk 2.2.12
A.J. Brown – tradingtrainer.com
Martin Rimes – hithtemarktrading.com
Illya Busigin – dtic.dtitrader.com
Tell us a little about your trading strategy and why you have chosen to focus on that particular method?
AJ – I trade equity options, because of their flexibility. A lot of people have a mis conception that options are increased in risk, but in reality, options allow us to hedge against risk. That’s why they were created. The first focus is understanding what the market throws at you. I looked at trading strategies with Forex, Stocks, etc. and these guys are looking for a particular pattern, and if they don’t see it, then they stop. With options, if you understand the nuances behind them, you have the ability to make money when people change in volatility.
Martin – Basically, I had an interest in trading early in life. In my early twenties, is when I was able to start trading with money. I made a lot of mistake. So my method came from trial and error and a lot of education. I was introduced to the CCI (Commodity Channel Index), in a moving market, it is a wonderful indicator. When the markets went sideways, and in very tight range, it was really tough to trade intraday. So that’s when I got into the option thing. I loved to do Futures and I loved to do options. It makes you a well-rounded trader.
Illya – I’ve been trading since 2001, and tried everything. I settled on options and seasonal trades and never looked back. I noticed that in certain times of years, certain things repeat themselves. Options are a great investment vehicle.
What is the biggest struggle that you faced as a trader, and how did you overcome it?
Illya – The biggest struggle I faced as a trader is discipline. The seasonal trading helped me to be disciplined. It is very important to document your approach. I advocate every trader to do that.
Martin – Probably the number one struggle for me was, in the beginning, the emotions. If you are overly enthusiastic, you are not the master of your emotions. A trader has to arrest these emotions and feelings that you’re going to be right all the time. You need to take a look at yourself and your emotions. I would look at books, or anything, that would help you figure out what’s going on in your head. You simply have to be able to accept losses, because they are a part of the business. I had to really really hone down my skills and I would print off my charts every single night and take a ruler and pencil and draw.
AJ – That exact point with the sim account, its almost like when you start out trading and you’re at a crawl, then you hit your comfort zone and it’s a run. The minute you switch from paper trading to real money, its back to a crawl. We have emotions taught to us from birth about money. I was trading, starting in 1997, and I was sitting at a cube in Hewlett Packard, and on the weekends, I would go to any seminar in Silicon Valley to learn how to trade. Journaling the heck out of things, not just keeping a money log, but journaling things. Looking at your trades, successful and not, and trending your journal quarterly, and then do an annual look back at your journal, then come up with conclusions.
A.J. – I’ve heard you try to break things down into two simple tasks, pattern recognition and pattern utilization. Sounds good, but what does that mean?
I strive first to be a pattern recognition specialist. And then I want to become a pattern utilization expert. These patterns can be as simple as a time decay curve. That’s a very reliable pattern, because time ticks down. Each second is the same. The simpler the pattern, the less the profit, so when we get into more challenging patterns, you decide how to utilize the pattern. How will you use the pattern? You can utilize patterns very well with options. Its all about identifying what’s given to you, and then utilizing it and understanding your tools well enough.
Martin: What advice would you give to a new trader that’s struggling in the market?
You’ve got to be honest with yourself about how your emotions work. How do you respond when the trade goes in your favor? You get excited. When you have a bad trade, you’re crushed. Learn your emotions. They say there are two types of people in the world: hunters and gatherers. The hunter is easily distracted, if you’re the hunter, you’ve got to cut the distractions. If there are people that are trying to trade and babysit at the same time, it doesn’t work to well. Trying to trade with a kitchen re-model happening, its not going to work to well. What’s your make up? Take a sheet of paper out and on the left hand side write “pro” and on the right hand side, write “con.” Write down what you’re really good at, and then write down what you’re not so good at. Something about having that written down and having that in front of you will trigger something in the brain. You’ll see what you’re proficient at. The number one thing if you’re not distracted, and you’re not emotional, and you’re still struggling, is getting back to the basics. Indicators derive their usefulness from price. If price is not moving, then you’re indicator is useless.
Illya: What would you say to people who think seasonal trends are more coincidence than a viable trading method?
One thing with seasonal patterns is to simply observe the markets. Many factors can cause season patterns. One is a pattern for Alliant available here: Alliant Pattern. It’s a 30 day pattern. Its very simple to see that Alliant has a seasonal trend. We all want to make money in the markets, but we don’t want to sit in front of a screen 24/7. Going back to money management is very important. You really want to take money management seriously. Check out the Alliant trade. There is a bona fide seasonal pattern.
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Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of TradingPub.com. Article intended for educational purposes only and not meant in anyway as a solicitation to buy or sell certain securities. Please consult your personal financial advisor before using this information for your own trading purposes.