Monday, July 1, 2013

My response to a valid reader question - "why your premium service?"

RE: Marks comment

why sell the 'tips'? Why not just make a lot of money and retire? I am genuinely interested in your service, but as Livermore said "If you need someone to tell you when to buy, who will tell you when to sell?"

i completely understand this comment...and until i started blogging / tweeting my trade ideas over the last year...i had the exact same opinion of trading "advice" from an anonymous guy on the internet.  Here is my response. 

I don't intend to just give my buy/sell levels (yes, i'll give you those).  i don't think these alone will really help most traders tho...because of the inherent fear of trading which you allude to) premium service is more than 70% additional "education" info where i talk in more depth why i make certain decisions and how my thinking process works.  

My subscribers will attain their best trading results, as do i, when  they understand what type of pattern the market is experiencing.  Sometimes the pattern my model identifies is very short term (minutes to hours)...and sometimes slightly longer (hours to days).  Once  my model (and hence, i) understand the type of pattern that the market is going thru, my model creates buy and sell levels that make sense in light of the pattern.  If the market generates price action which invalidates the pattern, then the model gets stopped out and continues searching for the next pattern.

As time and days go on, subscribers to this service will learn to identify and classify these patterns.  Sometimes, an invalidation of a pattern can become a pattern in and of itself.

Over time, this will be similar to the experience that my junior traders used to have (for years, i was the guy on the desk that had the kid from MIT/Duke/Princeton sit next to me for 6-9 months as i taught / he learned the internal dynamics of the treasury market).  I have a technology background, so teaching was not hard for me, because i started out as an "outsider".

While i'm confident that if you were to follow all my trades and trade alongside me, you would have a positive net P&L, i'm even more confident that after spending 6 months to a year on my service, you will be able to anticipate many of my trades and ideas before i even post them...or when i post them you will think..."that's exactly what i was thinking"..and the reasons behind my thought process can help explain your own thought process, and give you more confidence, which will help you enter and exit the mkt (selling a pop...or buying a dip) instead of being paralyzed with fear and greed (the demon of most traders).  Its scary sometimes to sell a pop to initiate a short position (if the market is popping...then maybe it will keep going up...yikes!!!)  However, selling the right pops and buying the right dips are the ideal methods to generate P&L in the interest rates markets.  Generally, interest rates tend to mean revert so a fair value level.  The problem is that this "fair value level" changes from day to day...and the change can be a lot.

If you spend enough "screen time" staring at the treasury market along with me, i suspect you will start to notice patterns.  This normally takes at minimum, 1-2 years (don't take my word for it...go ask other traders).  It took me about 3 years before i felt like the treasury market was "speaking to me"...i was slow in this regard.   Part of recognizing patterns is having a frame of reference to start with.  Everybody has access to intraday price that is the common form of reference...but without a basic guide on how to read a price is difficult to discern the patterns at play.  The model that i've developed gives a frame of reference from which to view these price charts.

This "feel" that i refer to is not always there...but after enough time, i am now able to feel when the mkt is speaking to me...and when it is not (thanks to this model).  Now, when the mkt speaks to me..i trade..and when it doesn't i try to not trade.  You might say that the mkt has an ebb and flow like the ocean...and after enough time...when the waves get sufficiently really can feel them in the screens (the model discerns a pattern and projects a continuation of the pattern creating buy and sell signals).  One of the mistakes traders often make when they first experience this is to think that the "feeling" of a particular read will continue.  For example, after enough time...i've learned that most "ebb and flow feelings" are temporary...and are best used to get in and out of the mkt in short time-frames (usually less than an hour..and usually for 4 to 8 ZN ticks).  When i first experienced this..i was great at picking entry levels and my position would quickly make 3-5 ticks...but then the feeling would fade, and instead of exiting for a small profit when the "feeling" faded...i would wait for a large profit ("i think" would turn into "i hope") and instead i would watch the mkt take it all away.

This type of mkt feeling is difficult to ascertain if you haven't sat on the trading desk of a primary dealer, because of all the information that passes thru those desks (some info is trades..some is the opinion of very large traders such as Buffet, Soros, PIMCO, SAFE and the like talking with the head of the desk).  That flow information (while useful for scalping) is most valuable as a tool to learn what effect certain volume trades have on the mkt (you can't imagine the power and control you have over the mkt when you get to do these large flows and nobody else knows).  After seeing enough of can get a feel for how certain chart patterns combine with certain volume trading patterns (i've embedded these patterns into the model).

I would have never picked up this minutiae if i wasn't part of a primary dealer desk...its not fair..but that's just how it is.  Maybe there are trading prodigies out there who can learn these patterns without this experience..but i wouldn't count myself among them.

The "bonus" is that after having seen enough of these flows, how they impact the mkt and how the mkt reacts to the flows hitting the screens, i can now "see" the flows in the screens even tho i'm NOT at a primary dealer anymore...and i have a general feel for which customers do what...both types of trades...typical size..typical placement...etc.  I've taken this experience and built a trading model around it. "conclusion" service, while useful in itself for the trading more useful as an educational service...and that's how i'm billing it...a premium education service.  If you were trading equities...i'd suggest one of the equity Virtual Trading Floors...where experienced intraday equity traders talk about patterns they see in the mkt in a chat-room.  However, my experience is in US Treasuries.

If you want to trade US Treasuries, and you have the opportunity to get a spot on one of the primary dealer desks...i strongly suggest you take it.  There is no substitute.  My service is an option for those who don't have that opportunity.  I haven’t found another twitter service / chat-room or other opportunity to follow/ talk with a former primary-dealer US Treasury trader with my experience who has made themselves available to the internet..   If any of my readers are aware of one…I’d happily reach out and get in touch with them (because I enjoy the camaraderie). 

Of course i already speak with my former colleagues…but you can never have enough info when you are dealing with a market that has so few large participants compared to the size and depth of the mkt.

Who do you talk to when you are trying to understand the US treasury market?…could you trade better if you widened your community??

Regarding questions about this new service and my own trading...yes...every trade i post on the private feed is a trade that i am making myself.  I cannot tell you what to do....but i can tell you what i'm doing.  I can tell you where / when i buy / sell..and i can tell you why...and that is exactly what i do in the private twitter feed.

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