Summary: Week 1

It has been a few days since my last post. I apologize. I have been a little busy and then I chose to relax yesterday and watch some basketball. By the way, next weekend is one of my favorite times of the year ... March Madness. In years passed, I loved taking some time off on Thursday and Friday, going to a sports bar that has all 4 regional feeds for the NCAA tournament, and soaking it all in. I don't think I will be able to do it this year, but something tells me there are going to be a few TVs turned on the trading floor turned to CBS during the day.

So ... what happened the rest of the week? On Thursday, we got to trade live (w/ a fake account) and try out some of the scalping techniques that were taught to us during the week. Needless to say, I was awful. I guess that is why they say to give yourself 6 to 9 months. Within the span of an hour or so, trading 100 share lots and no more, I was down an imaginary $400 bucks. That is not very good at all. I guess that is why they start everyone off at the beginning trading no more than 100 shares at a time with very limited capital. Of course you can't make big money only trading 100 shares at a time, but it is all about staying in the game. More money = more power = more potential for damage. If you dig yourself a big hole from the start, psychologically you are doomed.

I have been studying Technical Analysis for some time, so in the afternoon, I asked the instructor if I could trade "my way". I wanted to hold each trade for longer than the scalping techniques were requiring. I wanted to see if I could read the charts and pick proper entry and exit points. The instructor chuckled at me and said "OK". In the afternoon, I was up $300 bucks and didn't pick a single loser: 6 for 6. I realized at that point, my trading style, at least in the beginning, should be more position trading than scalping. I just felt more comfortable with it. Each position I got in had a drawdown of $30, but I felt comfortable with it, and each one came back and did really well by the end of the day. I definitely need to learn scalping, but I think I am going to practice it during the "down" time from position trading.

As a result of Thursday afternoon, management decided to change who my coach was going to be. They switched me from someone who is primarily a scalper to someone who is primarily a position trader. I was able to talk with him and really felt like I was able to connect. We had quite a bit in common, so hopefully this will help pay off as well. The guy is definitely not the top trader in the firm, but he makes a very nice living, and when he described his trading techniques to me, I just felt comfortable. He did mention that he expects me to trade at least 5000 shares a day in the beginning, so I am going to have to trade a little bit shorter term than what I am used to. Regardless, this is all part of the learning experience and this will be a very exciting next few months.

On Friday, we didn't really get to trade at all. We studied for and then took a test. Yes .. another test! This one required us to describe the different scalping techniques as well as most of the functions of the software. We also had to memorize the different stock sectors and at least 5 stock symbols in each sector. I didn't study enough during the week for the test, so I bombed it. We have to make 100% on it before they fund our account with real money, so several of us are having to retake it again next week. The only person who made a 100% was one of the firm's former software engineers who is switching over from programming to trading. He has been around this stuff for 4 years and already knows it all. The rest of us .. we just didn't have a chance unless we went home and studied for 4 hours each evening. I didn't have time to do that. I think they give this test on purpose to get you used to earlier failure.

One of the very interesting sub-plots of my whole story involves another new trader in my "orientation" class. He is actually a former floor trader from the Chicago Board of Options Exchange. The guy is an absolute wizard at options and options strategies. On Friday afternoon, he began to describe to me the "real" thinking about how options are used as an investing strategy. He described to me the Black-Scholes and Cox-Ross-Rubenstein models of option pricing. He also talked to me about Delta and Volatility and what an option actually represents in relation to these two variables. It was like I was at an Options training class where I was the only student. I was asking a bunch of questions and really learning about ... well .. everything I had wanted to know about with options. The more we began talking the more he actually wanted to enlist my help. He doesn't know much about higher mathematics or computer programming, but he knows how things work in the options market. He knows there are relationships between the price of options, the price of the underlying stock and certain economic conditions, but doesn't have a good idea about how to represent it in terms of building a trading system. He asked me if I was interested, in my spare time, working with him to build a lot of his ideas in a trading system. Something that is black box - does all the buying and selling automatically. I actually told him that is what I have been dying to do the past several years - combine my math expertise with my computer skills and my interest in the markets to try to come up with something exactly as he has described. He was excited and said we were in business, so hopefully next week in the evenings we can get together and I can learn more.

All in all, this was a good week. I didn't make a dime, but I had a lot of fun and the potential for more is definitely there. I feel like one way or another a lot of my strengths are finally going to be put to good use, and that is exciting for me. The main person I am going to have to compete with and control is myself, and I am ready for the challenge.