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Wednesday
Nov142012

Simple Emini Trading - Part 3 

(QQQ)(FB)(AMZN)(SPY)(GLD)

 

"Experience is one thing you can't get for nothing. "  Oscar Wilde

 

Simple Emini Trading - Part 3 / The Old Butcher

 

In Part 1 we discussed what the market is capable of doing. There are only 3 things. Can you remember what they were? If not, go back and review the material. We also discussed the new traders reluctance to use a hard stop and how much that mistake could cost him or her, their first day on the new job. Do you remember? If not, read it again. 

What's amazing, this new trader who will on average lose that much money on his first day by doing the very thing even the cab driver told him not to do, is the same guy who was reluctant to invest in an education and was uber-obsessed with shaving $1.00 off his round turn commissions with a $3k account. So what if the trade desk is in India and the broker himself has never placed a trade before, "I'm saving a buck per round turn!" "I got this thing wired."

We also covered how long the average trader will chase his/her tail in search of a holy grail and we wrapped up Part 1 with a bit of encouragement. Since the market can only do 3 things, it seems only fair that you should only have to do three things. Do you remember the 3 things you need to do? Go back, read it again, and for heaven's sake write it down.

In Part 2, we talked about taking a fearless and searching moral inventory of what we really believe about trading and ourselves. Not what we profess to believe, what we actually believe. How did that go? Did you learn anything? Did you discover some beliefs you were dragging around like an old suitcase that were nothing more than an old wives tale? (sorry ladies)

If you didn't do the exercise, I can only suggest that you get after it right now. This Simple Emini Trading Mini Course, is the closest thing you'll ever find to a short cut in the trading business. By the way, there are no short cuts. If what I've asked you to do seems like too much work, this business probably isn't for you. Or perhaps, you just aren't ready for the business. Trading is a job and the harder you work, the less you'll suffer.

The idea is simply to clear your mind of false belief systems and along with the new trader, build a solid foundation of factual truths.

  • Anything can happen
  • You can make money without knowing what is going to happen next
  • There is a random distribution of wins and losses that define an edge
  • An edge is just the greater probability of one thing happening over another
  • Every moment in the market is unique

Some of you might recognize those words. If you've been around me for any length of time I hope they not only have a ring of familiarity, I hope you've written them on the tablet of your heart. In Part 4 we will take these Trading Truths and break them down one by one. Before we do that, I want you to spend some time meditating on them. Try to find a chink in the armor. These along with other truths I will share will become the bedrock of who you are as a trader. Do not merely accept my word, Mark's word, Michael's word, or anyone's word about truth.

You can memorize these 5 truths, you may be able to recite them backwards and forwards, you might even confess them with your lips to be nothing but the truth, yet in your core being where it really counts, if you have any doubt whatsoever, you have a shaky foundation. Put it in park and do the work. Proceeding at this point without first trying to punch holes in these concepts, will do you more harm than good. Get a journal, your legal pad, something to write on, and once you've wrestled each one of these ideas on the mountain top one by one, if you believe it and are willing to build your house on it, write it down.

I have done my very best to build a case against it, to find a weak spot, to reveal any falsehood. Despite my best efforts to disprove this trading truth, I can not. I will now use it to fortify and grow my Emini Trading Business.

 

X_________________________Signature                X_________________Date

 

I know what you're thinking. A little cheesy, a little beneath you, a little silly. Before you bull-doze ahead, give this some thought; what if everything you believed about your current business was an absolute truth? What if everything you believed about a good marriage was an immaculate truth. What if you only practiced child rearing techniques that were based not on psycho-babble but immutable truth, is it possible you could be a more successful businessman, a better husband, a more excellent father?

All I'm trying to do is give you that very opportunity in your Emini Trading Business. Together we'll build it one brick at a time, one truth at a time. No regrets, no remorse, just peace of mind.

Os Guinness is the author of a book - In Two Minds. His book deals with Christian faith. I have long said that faith is not what you believe, faith is what you do, with what you believe. James perhaps said it best of all, "Faith without works is dead. Show me your works and I'll show you your faith". This is a scripture that tweaks even the stoutest of theological minds. However, I am using it here to bring us to the excerpt I want to share from the book "In Two Minds".

We are now wrapping up our third chapter of Simple Emini Trading. Aside from a few warnings, simple projections and some humble observations, the meat of what we have discussed is "what we believe", and how important that is to the success of our Emini Trading Business. So in the context of what I believe faith to be and what James has taught us about faith in Scripture, I give you Os Guinness.

"A healthy understanding of doubt should go hand in hand with a healthy understanding of faith. We ourselves are called in question if we have no answer to doubt. If we constantly doubt what we believe and always believe-yet-doubt, we will be in danger of undermining our personal integrity, if not our stability. But if ours is an examined faith, we should be unafraid to doubt. If doubt is eventually justified, we were believing what clearly was not worth believing. But if doubt is answered, our faith has grown stronger still."(In Two Minds p.15)

Now what does any of that have to do with an Old Butcher?

A Man(n) I know named Merlin, tells the story of a guy who's been a butcher for forty years. His young apprentice calls out for two and a half pounds of roast beef. Without glancing at a scale the old butcher hands the young apprentice a heaping stack of perfectly sliced, paper thin, roast beef. The young apprentice asks, "Aren't you going to weigh it?".

The old butcher says, "You asked for two and a half pounds of roast beef and that's what I gave you." The young apprentice has his doubts and places it on the scale. Much to his disbelief, it's not an ounce over or under. It's not even a fraction of an ounce over, or under, it's two and a half pounds of roast beef.

The young apprentice shrugs it off as a lucky guess. Over the course of the day the scenario repeats itself time after time. Sometimes it's roast beef, sometimes it's corned beef, sometimes it's liver. Two  pounds, three and one quarter pounds, even ten pounds, it's always exact (to the tick).

As the day draws to a close the young apprentice can no longer contain himself. He's certain he's been made a fool of. He confronts the old butcher. "Ok old man. What's the trick? What kind of magic are you using to fool me?" Calmly the old butcher replies, "I assure you there is no magic involved". Furious now, the young apprentice yells "I am your apprentice. If I am to become a good butcher, you must teach me the trick". In a calm yet stern voice the old butcher tells the apprentice, "The trick is, you have to be a butcher for 40 years."

The apprentice stormed out and was never heard from again.

I'm pretty sure you get the moral of the story. Hopefully it won't take you 40 years. (like Moses)

 

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