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What has been shared is we are trading our beliefs and Mr. Docteur is
trading the market. This is something we have all been taught before.
Mark Douglas, wrote of this in "The Disciplined Trader", Bill Williams
expounds upon this in his lectures.
I, for one, have not had the success this year as I had last year, and now
I realize that my analytical work had me "believing" which direction
stocks/bonds would move. As such, I changed from a day trader to a
position trader. And that is not my style.
I personally think that Mr. Docteur will increase his knowledge and respect
for the markets after the markets have exacted the necessary "tuition".
Then, with humility, he may become a trader of great stature. Anyhow, he
has my thanks for reminding me to be less predictive and more reactive to
the market as it unfolds each day.
Al Taglavore
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> From: Steve Karnish <kernish@xxxxxxxxxxxx>
> To: metastock@xxxxxxxxxxxxx
> Subject: "Dockers has left the building."
> Date: Thursday, February 25, 1999 2:06 PM
>
> In the end, what has been shared? Buy low, sell high? Use tight stops?
> Sell an "evening star" pattern? Buy a hammer? Invest 50% of your
capital
> in one issue?
> Brilliant stuff from a "newbie" that has traded for less than a year.
Many
> of us use exactly the same tools (unmechanically). Few of us think we
are
> "God's gift to trading". As they say in the north Idaho panhandle:
"What
> a pile of bear scat".
>
> Steve Karnish
> CCT
>
>
>
> ----------
> > From: Docteur <docteur@xxxxxxxxxx>
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Re: S&P 500 (was AOL, CSCO, & WMT)
> > Date: Thursday, February 25, 1999 10:46 AM
> >
> > Rick and ALL on this thread,
> >
> > Thanks, thanks for all the input. Wow. It was huge.
> >
> > Hopefully this letter will put all this bantering to rest. By some of
> > the e-mails I have received I pissed a lot of people off. It wasn't my
> > intent. My intent was to share my style of trading, which works very
> > well for me. I understand now that we all have much different styles.
> > Some of us have "systems" that work. I'm not one of those.
> >
> > First off I never said this is easy money. It's the most intense and
> > difficult thing I have ever done.
> >
> > Secondly, I know nothing of market dynamics and don't care to. I don't
> > really know what makes my computer work either but I sure can make it
> > serve my purposes.
> >
> > So you won't waste your time speculating any more here's what I did in
> > November (my 2600% return month): I made 37 trades (round trip and
those
> > I added to as a stock climbed/fell were all bunched under one trade).
> > None of them were more than two days in duration, the majority of them
> > were less than three hours in duration. 33 were winners and 4 were
> > losers or break even, including commissions and slippage.
> >
> > My account balance is the same at the beginning of each month. I take
my
> > profits out at the end of each month and start over fresh. Why?
> > Because with the kind of returns I am making I am living very, very
well
> > and I see no point in rolling profits back into my account. I don't
> > need more than I am earning. I want to spend the money now and enjoy
my
> > life. And besides, I have a very large nest egg from my other
> > businesses that is my slow grow capital (20% - 35% per year).
> >
> > I may be reading this thread wrong but I assumed the goal of trading
for
> > most people on this site is to make a living at it. If not, well then
> > my style is not for the people reading this post. I take and spend
> > profits every month. I have no debt and enjoy life immensely.
> >
> > As soon as I start trading again (remember I am reviewing the last
> > several months and just focusing on learning more right now) I will use
> > the same strategy and guidelines that I did in the last six months,
> > those being: Never risk more than 50% of my capital on any one position
> > and never risk more than 4% of that on any one LOSS.
> >
> > More often than not, my stops put me at a break even or a commission
> > loss. I keep very tight stops and only enter a trade when it screams
at
> > me to enter. I never trade more than TWO STOCKS at any given time. I
> > typically buy between 10 and 100 contracts per trade, depending on how
> > deep in/at/out of the money I am on that trade. Very intense but it
> > works for me. So, I try to never risk more than 2% of my capital on
any
> > given trade LOSS.
> >
> > So, if I make 30 trades in a month and the average trade is 100% return
> > on 50% capital at risk (which with options is very possible
> > consistently) I am cruising along at 1500% per month on my capital
> > account at the beginning of each month. I won't tell you how much my
> > base capital was during the last six months but when I start trading
> > again (as opposed to taking a break to continue learning) my base
> > account will be in six figures.
> >
> > I keep very tight mental stops and never enter a trade unless I see an
> > intraday period top or bottom. I trade off real time charts and use a
> > 15 minute time frame for candlesticks and chart patterns and a dynamic
> > daily chart to give me the bigger picture of support and resistance
> > levels.
> >
> > Market up or market down makes no difference to me. If it's falling, I
> > simply buy puts. So your discussion of what the market did over that
> > screaming three months holds a little weight, but not much. Remember,
I
> > earned 1200% in January and themarket basically closed where it opened
> > for the month. I actually have done better with puts than with calls,
> > even with an up market because of the volatility.
> >
> > I generate the kind of returns I do because I work on a monthly basis.
> > Average return on capital for the year will be close to what I earn
> > monthly because the base stays constant. My goal is ten times my
> > account balance at the beginning of each month. For the last six
> > months, I have averaged that or better. Again, I pay myself at the end
> > of each month over and above my static capital base. That affords me
> > less risk and higher returns and I don't continue to roll my profits.
> > Why take more risk for less return? I pay myself at the end of each
> > month and start over again because I know that I can match my previous
> > months return. And I have been making a phenomenal living just doing
> > what's in front of me.
> >
> > Like I said earlier, I know nothing of market dynamics. Don't need to
> > and don't care. I know market makers control this thing. I just want
> > to go in the direction they are moving it. Doesn't matter to me what
> > they are doing or thinking. I couldn't care less. Won't waste my time
> > trying to figure out what everyone is doing to manipulate the market.
I
> > just trade what's in front of me.
> >
> > I keep my strategy simple and read the market as it unfolds. Market
> > dynamics? Nah, waste of my time. Know nothing about them. You nor
> > anyone else understands them either because if you did, YOU'D be on the
> > cover of Forbes. Even Greenspan admits there's a lot he doesn't
know...
> >
> > Truth is you have a system that works pretty well. Great. Keep doing
> > what you're doing. More power to you. More power to all of you.
> >
> > My style of trading (definitely not a system because the market is
fluid
> > and a systematic approach just doesn't serve my purposes) affords me
> > great monthly returns on my capital with very little risk. Defnitely
> > not for everyone. But my goal is to make a really good living/cash
flow
> > at this with the least amount of risk. I'm succeeding. That's all
that
> > matters to me.
> >
> > Again, if I was continuing to build my capital base of course my
returns
> > would progressively shrink every month. But why continue to risk
larger
> > sums of capital for smaller returns? Never understood that one.
> >
> > I live off what I earn and live very, very well. My risk is minimal,
my
> > returns quite satisfactory. What more could I ask?
> >
> > BTW, great analysis. It just doesn't apply to me.
> >
> > I wish you and everyone onthis thread continued success. If nyone
wants
> > to contact me please feel free to do so direct.
> >
> > Doc
> >
> >
> >
> > Rick Mortellra wrote:
> > >
> > > Lionel,
> > >
> > > After reading his "proof" exposing this guy is easy and I don't even
> have to
> > > check his *hypothetical* trade prices, nevermind his real ones. The
guy
> is
> > > all over the place, having us in a trade for 3 hours one time and 30
> days
> > > the next. He also expects us to ignore the fact that these gains
> weren't
> > > made over a series of many trades but just 2 huge totally disimilar
> trades
> > > made months apart. Practically one-offs in other words. Especially
> since the
> > > stocks he mentions are extraordinary to say the least as well as the
> time
> > > periods in which he trades their options. These stocks have exhibited
> > > unprecedented prices moves during a never-before-seen 3 month market
> period
> > > that saw the Dow gain more than 30% and a NASDAQ gain of almost 85%.
To
> > > imagine this "easy money" is the normal state of the market from now
on
> and
> > > trades like this can be made daily is total naivete.
> > >
> > > Now here's how the math catches up with his charade:
> > >
> > > Of course buying CALL options can keep his losses small EXCEPT he
bets
> his
> > > whole wad on each trade because he infallibly calls the highs and the
> lows.
> > > But if he looses, which he implies he sometimes does, he looses
> EVERYTHING.
> > > End of fairytale.
> > >
> > > Obviously he has lived to trade again so he must not be betting
> everything
> > > and perhaps he's practicing a little bit more money management than
he
> lets
> > > on. In which case, his 2400% return on his *account* is not what it
he
> makes
> > > it out to be.
> > >
> > > Let's keep it simple. Say he still bets a very imprudent 10% or $1000
> of a
> > > $10K account on the AOL trade. He wins $24k. Suddenly his total
> hypothetical
> > > account's return is just 240%, still not too shabby. However, maybe
> he's not
> > > so wild and crazy and only bets 2%. Now his total hypothetical
returns
> are
> > > back down to a more believable 48%.
> > >
> > > But, he completely ignores slippage and commissions. Not that
> commissions
> > > would be adversely huge (maybe for a 1000 contracts though) but they
> sure
> > > won't be $20 roundtrip either! Slippage, on the other hand, could be
> very
> > > adverse to his options' return and it is a stretch for us to believe
> that
> > > he, as a retail customer, could buy 100, much less a 1000, contracts
of
> AOL
> > > for a 1/16. Frankly I can't even imagine an expiring option with
strike
> of
> > > $160 for a wild stock like AOL trading barely out of the money that
> low, but
> > > perhaps it did among option makers/institutional accounts at the low
of
> the
> > > cash market. Nevertheless his trade would probably make up a
> substantial
> > > part of an expiring options' total open interest that day and as soon
> as his
> > > order hit the sheets the options' bid/ask would fly. He's talking
> trading
> > > 10,000 to a 100k shares of the underlying here too and the options
> maker is
> > > also gonna lay that risk off in the cash market. Needless to say, he
> seems
> > > to lack a complete understanding of the market dynamics. Cutting him
> some
> > > slack and allowing slippage to bump a market order price up to just a
> > > measily 1/4 point lowers his trade return to 60%. And using 2% of his
> total
> > > account to enter lowers the return to a *really* more normal 12%.
> > >
> > > Now here's the big surprise! Once he starts making his big profits
the
> IRS
> > > is gonna want a piece of it. In advance! Because as anybody who has
> made big
> > > profits in stocks learns, you gotta pay your estimated taxes
quarterly
> > > whether you finish the year at an overall profit or not. Otherwise
the
> IRS
> > > paddles your behind with penalties. This directly impacts the amount
of
> his
> > > trading capital available throughout the year, hence the overall
profit
> he
> > > can generate, thus lowering his return even more.
> > >
> > > So as you can see, unless you belive 1-2 lucky trades vouche for a
> persons
> > > trading skill, just overcoming the frictional costs of trading is a
big
> > > hurdle for any trader regardless of his system or lack thereof. Even
a
> huge
> > > win can be cut down to size.
> > >
> > > Of course the simple solution is to make more than 1 huge trade a
month
> but
> > > I doubt if he could conjure up enough historical data. Certainly not
> enough
> > > to satify my risk profile.
> > >
> > > At least I give him credit for buying slightly out-of-the money CALLS
> on
> > > highly volatile stocks on expiration, as it is a tried and true
> strategy.
> > > Especially, in these net stocks like AOL when they are splitting the
> > > following Monday. It's a great punt WHEN it pays off. But make no
> mistake,
> > > that's exactly what it is, a punt, as any option maker will tell you.
> Just
> > > like a lotto ticket, 99.99% of these plays expire worthless, except
in
> this
> > > case the ticket would cost you a minimum of $625. But when they
payoff,
> the
> > > rewards can be spectacular. I congratulate him on his paper win, but
> now the
> > > challenge for him is turn his Monopoly money into cold cash.
> > >
> > > cheers,
> > > Rick
> > >
> > > -----Original Message-----
> > > From: Lionel and Gail Issen <lissen@xxxxxxxxxxxxxxxx>
> > > To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
> > > Date: Thursday, February 25, 1999 1:13 PM
> > > Subject: Re: S&P 500 (was AOL, CSCO, & WMT)
> > >
> > > >Docteur:
> > > >
> > > >Your "proof" is after the fact. What have you traded?
> > > >
> > > >
> > > >Lionel Issen
> > > >-----Original Message-----
> > > >From: Docteur <docteur@xxxxxxxxxx>
> > > >To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
> > > >Date: Wednesday, February 24, 1999 7:52 PM
> > > >Subject: Re: S&P 500 (was AOL, CSCO, & WMT)
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