Trading RM, LLC.

• We all have targets/ goals. These are important. But how do we get to these goals? We pick a target: this can be one profitable trade, learning to trade a new product, limiting losses, working on timing, using a new indicator, etc...

• What weapons will help us reach this target? Our front end, our co workers, our trading coach/mentor, our morning game plan, our after hours review, etc...

• What movements do we take? Our weapons will dictate our movement. A trader may read about a new indicator, back test some data, seek out a mentor, write in and review a journal, etc...

Today Trading RM was visited by Jeff Quinto. Jeff is a 37 year veteran of the markets. His experience includes the Kansas City Board of Trade, Chicago Board of Trade, running an electronic futures trading prop firm, and serving as a personal trading coach to many traders. In addition to coaching traders, Jeff also teaches a course at Northwestern University school of continuing education: Introduction to Electronic Trading, does a monthly video at Option News Network, and has frequent podcasts available on itunes. Jeff also has some great videos available on his website or on the website of the CME Group. I highly recommend these videos. Please visit Jeff's website for more detailed information.

Jeff broke his talk to us into two parts.

Breaking up the day

Jeff talked to us about breaking up the trading day. He divides the trading day into 5 "quintos." Jeff likes to use open, morning, lunch, afternoon, and close. The exact number of parts to the day or their exact specific time is not important. What is important is recognizing that there are different areas of the day where the market behaves differently. This is because the various market participants behave differently. What does a fund manager do at lunch? What does he do at the open? What are day traders doing at the close? What are market makers doing in the afternoon? Accordingly, we, as day traders, must adjust our trading during these parts of the day.

Despite the world being a 24 hour trading environment, the market seems to revolve around U.S. equity hours. What happens is we see a flood of liquidity during the open period. The morning is characterized by liquidity and fluidity. During lunch volume dies down. Into the close we often see big players closing, not entering positions. None of the above is true 100% of the time. But over the long run this is more or less what happens.

As traders (short term traders) we must recognize these scenarios and adapt. Every trader and every product is different. Certain time periods may call for less size, more size, not trading at all, being more aggressive, bidding vs. paying up, etc...

Pre and post market work

The main theme is a trader who follows a mediocre plan is ahead of both a trader who has a great plan but does not follow it and a trader with no plan at all. Not many successful traders can come in at the opening bell and leave at the close without thinking about their market before and after.

Another theme Jeff brought up is "man plans and God laughs." In other words, sometimes plans and goals do not always turn out perfectly. But the key theme is that no plan at all is a recipe for disaster. A great plan is never perfect, but it puts a trader far ahead of the game. As far as goals, for every level trader the key is to have attainable goals. Jeff used the example of a tennis player. It is one thing to say "I am going to start playing tennis" and buy a racket and go hit a few balls. Yet it is unrealistic for this beginner to expect to be a pro immediately. A goal to be a tennis pro is probably unattainable (at least in short term). More realistic goals include: getting 70% of my serves in, practicing three times a week, etc...

Likewise traders need to have attainable goals. For a beginner trader it may be "make $1.00." Or learn 20 new stock symbols and charts. A more advanced trader should have more advanced goals. But they should still be attainable.

Thanks to Jeff Quinto for his time.

We have been talking a lot recently about goals (daily, weekly, monthly and yearly). Why do we need goals and what are "good" goals to have.

1) Why we need them: someone said "no one plans to fail, they only fail to plan." I suspect very few traders (hopefully none) plan to have bad trading days/weeks. But how many traders do not plan their day or week? Too many. So if we do not plan to fail, why do we fail to plan?

Dr. Brett Steenbarger writes that having a desire to succeed is not sufficient to succeed. You have to do the work. Does a trader say he has a passion for the business or does he show it? Likewise it is important to be consistent in goal setting. It is not enough to have goals for Monday and Tuesday but not the rest of the week. Likewise it is not enough to have goals for one week but not set any for the next weeks. Lastly Dr. Brett has also touched on the importance of daily goals:

Dr. Brett says "Setting a goal each day creates learning loops that improve you significantly over time. Setting daily goals also keeps your head in the game, reinforcing your positive learning even during days and weeks where you're not making money." I underlined "where you're not making money." This is important for me - to be proactive and positive during times of draw downs.

Every one's favorite college football coach/analyst, Lou Holtz, has no shortage of thoughts on goals (or thoughts in general). I think many of his thoughts carry over to trading. Two great Lou quotes on goals: "If you're bored with life - you don't get up every morning with a burning desire to do things - you don't have enough goals" and “I’m a firm believer in goals. Take a good look at me. You’ll notice I stand five feet ten, weigh 152 pounds, wear glasses, speak with a lisp, have a physique that appears like I’ve been afflicted with beriberi or scurvy most of my life. The only reasons why I can stand up as head football coach at the University of Notre Dame are: I have a great wife and I am very goal oriented.” My takeaway: if you get up every morning and say to yourself that trading sucks or trading is slow then you do not have enough goals. If you have no goals you will have no success.

Many people have heard of Lou Holtz's "bucket list." Here is a brief back story of his list of life goals in his own words:




My takeaway: "be a participant, don't be a spectator. Do I come in every day and watch the market I am trading or am I engaged in it? Can I be engaged in it without having daily and weekly goals?

Lastly here is Lou Holtz on quick fixes:

"We have instant coffee, instant tea and instant restaurants. Everybody looks for a quick fix. There isn't any. You build it day by day. You don't panic. You don't overreact. You don't change your principles. If you preach the same thing over a period of time, and it doesn't change, one of two things is going to happen. They are going to believe in you or they are going to leave." My takeaway: I think this one is obvious. There is no instant fix to get out of a trading slump or a tough market. Keep working and keep working harder.

2) What are "good" goals to have:

Every trader has the same generic goals: "be green, have a high winning percentage, keep losses minimal, be green x number of days, etc..." The struggle for me is to dig deeper. I need better goals to become a better trader.

Dr. Brett has a great post on turning set backs into goals. We all have set backs, losses, fat fingers, and mental lapses. How can I turn these into opportunities and goals for tomorrow?

Previously I wrote about being process focused. This is an obvious one when it comes to goal setting. Do I set PnL goals? Or do I also set lower level, action orientated goals? For example: "this week I am going to track these two new indicators to see if they help with my timing. I am also going to cut my losses x% sooner until I have winners that are x% larger than recently. In the most recent two weeks my stats show my losers are getting slightly larger while my winners get slight smaller. " These are more specific than saying I am going to make $500 a day.

As mentioned above, Dr. Brett also writes about being consistent and overcoming procrastination. I think good goals are consistently set. Whatever your time frame is, set your goals every time. (daily, weekly, etc...)

Lou says: "The man who complains about the way the ball bounces is likely the one who dropped it." Do not drop the ball, set some goals.