Episode 6 Transcript: Zombie Trading Days Are Over (Part 1)

Mark Soberman: Welcome to the NetPicks Day Trading Authority. This is Mark Soberman and thanks for joining us today. And once again, I’m joined by my co-host superhero trader Brian “The Scalper” Short. Brian, are you out there?

Brian Short: I am Mark and thanks for those kind words that’s much appreciated.

Mark Soberman: Well actually, I’m just really reading what you told me to read.

Brian Short: I would never tell you to read such a thing.

Mark Soberman: Okay. Well, typically, I would never say such a thing, but the $20 bill that came with the script I figured what the heck, I’ll put it out there. So, we’re joining all of you with our latest podcast. Hopefully, most of you have had a chance to listen to some of the prior broadcasts. If you haven’t, I have a magical link for you that you can go to and learn a lot more about day trading, trading, and Brian really, because you definitely want to learn a lot about Brian. So, he shares a lot with you on this podcast and you just need to go to netpicks.com/podcast. And NetPicks is N-E-T-P-I-C-K-S.com, not to be confused with Netflix like my mom always says “So, Mark how is Netflix?” I’m always, “Mom, I do not work at or for or with Netflix.” But there you go netpicks.com/podcast. So, be sure to go to that, grab some of the past issues or go to iTunes like always, and you can subscribe. And whenever we get around at doing one of these things, it’ll magically appear on your phone, and then you can listen to it in the car, the bus, the train, the ship, whatever, at your workout, anytime you need a little trading pick me up, that’s what we’re here for.

But at the time we’re doing this, the summer is basically over. This is September when we’re recording this and we’ve made it through the June, July, August timeframe. I know for me personally, I traveled quite a bit over the summer, had an opportunity to go to Thailand, which is probably the most exotic of my trips, but pretty much went away three different times. And I actually think in a strange way that perhaps, could have been one of my best trading strategies because it kept me away from the markets when they were quite slow, and really sort of focus me a bit more on swing trading, which I know might be a bad word in a podcast called “The Day Trading Authority.” But it was something, I think, that sort of prevented me from the trading addiction, because I know if I was here, I’d be trading it regardless. So, how about for you Brian, what was your summer all about and, you know, kind of what happened for you?

Brian Short: You know, Mark, a very similar story. Although, I have to say I didn’t take quite as many vacations and trips as you did this summer, so, I just put that out there. But the trading itself was pretty slow this summer. The thing that was interesting, even though the trades were slow, there was a lot of profitable sessions. And so, as long as you were consistent in the market that I trade, which is crude oil, you just had to stick it out and kind of just some trades just took forever to get to their full objective. But if you hung in there, followed your trade plan, you were rewarded.

There were other markets that you know didn’t do so well, that were kind of choppy, the Forex being one of those. August is kind of notorious for that kind of price action. I think you said this morning on one of our webinars that we did for teaching that, you know, the last four years have been very choppy. So, you’ll get one year out of five that, you know, that is decent in August, the rest remain kind of choppy. There’s a lot of speculation why that is, Europeans taking a vacation or whatever, but it’s something to keep in mind in your own trading when you’re looking at trading the markets. But things are back to what I would call normal last week and a half or so. My trading on crude has been just rocking. In fact, I’m not bragging, but I’m on a seven-day winning day streak right at this point in time, and we’re in the middle of September at this time. So, that’s what’s going on with me.

Mark Soberman: Great. Thank you and you’re definitely correct, probably, went a little above average on vacations. But, you know, Brian, working with you, one needs to take some vacations to recharge. I’m sure your wife has told you that before.

Brian Short: You know, Mark, there’s a lot of sarcasm in your voice today. I’m really not sure why or if I’m that deserving of it, so we’ll just proceed on here and see. But I’d be ready for a comeback here anytime.

Mark Soberman: I think it’s mostly just our connection and just must be that. I mean, it must just be something technical that’s going on because I’m–you know, I’m surprised that you’re picking up on any sarcasm, but in reality, and without being sarcastic, I’d have to say, I definitely agree with you as far as you know handling the summer. If I think back to the last podcast we did, we talked a lot about education. And one of the things that we rolled out, and I’ll say it again, and encourage people to go to http://www.premiertraderuniversity.com and it’s premier without the little “E” on the end but premiertraderuniversity.com, and there’s lot of free education out there. And we talked about this at that time because we knew that the summer potentially was going to be interesting, and was going to require more discipline, more structure in the trade plans. It was going to be easy for a day trader to really get out of sorts a little bit, if you weren’t really following something very clear and very specific. So, definitely, you know, do yourself a favor and take a look at that website. Get involve over there. Get some of the free education, the webinars, et cetera. We definitely have a lot to offer and it will help you kind of get through periods like this, like the summer transitioning into the fall because it really does make a difference. There’s a lot of seasonality in markets and you sometimes have to approach them in some different or even creative ways overall.

And so, one thing I do want to mention, which is kind of interesting on the podcast today, we’re going to actually have an interview with Mike Rykse here in just a little bit, and he’s going to be coming on, and he’s really, I guess, for the most part, he’s commandeering definition, he’s sort of overthrowing, he’s taking over The Day Trading Authority because he’s going to come in and talk about Options trading and swing trading. I know I’m in shutter, I’m feeling a little queasy when I hear about a trade that might take more than 10 minutes, but this is a huge opportunity for day traders because one of the beauties of swing trading is it doesn’t take a lot of time.

So, once you start to grow your portfolio and grow your business as a trader, a lot of us, look for additional opportunities and we just don’t have the bandwidth to be able to trade 10-day trading markets at a time. I mean, you know, Brian talks about focusing on crude oil. You know, one market, most people it’s one to three markets and that’s it, so how do you scale your business? You know, one of the great ways to scale is to by bringing in some swing trading and not being offended by it, despite the fact that this podcast is really mostly about day trading. But we’re really primarily about active trading, so he’ll be on here in a moment. And it got me thinking, you know, what’s been working for me now. And if I’m in your shoes, I’m listening to this, you know, I want to know, “Hey, tell me what markets and Futures are working really well for you now. Tell me what markets and Forex are working really well for you now.”

So, I’ll show the ones beyond what Brian mentioned. Crude oil futures is been a favorite for ours–of ours really 2011 and 2012. I don’t see that changing. It continues to be a favorite. Also, for me, that’s been doing very well of late is the S&P MidCap Futures. The symbol on them is EMD. A lot of people don’t even know about it or they don’t’ trade it. It’s got decent volume, but not the kind of volume that you’ll see on markets like the S&P Mini of course, but even the Russell E-mini or the NASDAQ E-mini, but it actually has very good execution. I don’t really have any problems despite the volume being a little smaller getting my executions. Another market sort of like that as far as lower volume that’s really trading very smoothly right now that a lot of people don’t look at is, unleaded gas futures. The symbol or the base symbol is RB on that.

You just have to be a little careful for slippage. You don’t want to do a lot of market orders. On RB, you want to allow a few ticks of slippage on your entries. But just be aware, you know, it’s very common for the spread to be from five to eight ticks, but that may sound like a lot, but it really isn’t because a typical target, let’s say, in crude oil, might be 50 ticks for us. A typical target in unleaded gas might be 150 ticks. So, if you allow one tick of slippage in crude oil, it’s no different than allowing three or four on unleaded gas. So, I just kind of put that out to you. Another market is high-risk, high reward that’s been doing very well for me is silver futures. I really badly want to trade gold futures consistently, but it is one of those markets that I find is hot one month, cools down another month. I get more consistency with silver, but it’s not for everybody certainly if you don’t have a larger account, you know, don’t trade it.

Now, on the middle, a bit of the mixed results category is has been one of my long standing favorites, which is the Russell E-mini TF. It’s kind of stuck in a range. I mean, Brian just mentioned this, I mean I literally have had two days in a row with no trade. Now, two days in a row not trading it might sound like a bad thing, but I’m so thankful that my trade plan and system did not get me into it because it was worthless. So, it’s better to have no trade on a crappy day than have a lot of trades on a crappy day, and then you end up getting chopped up.

So, I’m waiting for that one to wake up. It hasn’t as of yet. And the DAX Futures has started to wake up for me. It was really good in June and July. Into August, it was good, and then all of a sudden the tail end, last half of August, it was kind of lousy. And then since that time, I’m starting to get the results again, so that’s starting to come alive a bit. And I’ll kind of end it with those of you who are in the Forex world and want a Forex trade. On the day trading side, the only thing that I’m consistently seeing performance on is the EUR/USD in the US market hours, and maybe adding to that the EUR/JPY in the US market hours. I’m not seeing great trading in the European market hours unfortunately. Historically, that’s been a great time to trade. It has not been in the summer and it’s not as of yet. There’s a lot of external things going on that we could talk about that’s probably influencing that or keeping it really constricted. But right now the only thing that I’m seeing working the European hours in particular is if you’re willing to go for a modest target and have a much larger risk so you can kind of sort of survive that up and down whipsaw, and then ultimately get your target. If you’re going for very much those one to one risk-reward or you’re going two to ones, it’s really not working. So, that would be what I would advise there.

Now, on the other side, swing trading like the EUR/NZD, the EUR/AUD, the EUR/USD, the GBP/AUD, the EUR/JPY, all of those have had a really good summer all the way through August, so, that’s kind of where I would be spending my time and looking at certainly, you know, there’s other markets. You know, some people might say what about the S&P Mini and what about the Dow E-Mini? You know, they all have their place. We’re just sort of trying to talk firsthand as trader. So, Brian, anything you want to add to that?

Brian Short: Just that, you know, Mark, you’re aware of this, but I’ll share it. I specialize in crude and the particular plan that I trade or trades for an hour and 40 minutes. And for me, that’s very beneficial. I think too many times as traders, especially a new trader when they get that bright shiny new strategy, the temptation is to just trade 24 hours a day. And really we’ve discovered here at NetPicks the opposite is true. You want to pick those timeframes that work for you as a trader, we call it lifestyle trading and engage the market under your terms. And Mark, just like you today, I didn’t have any trades on crude, which I was thankful for. There was a setup that I was really skeptical about, but it never ended up triggering. Price action was just very flat today and it’s kind of unusual. I think the last time that I didn’t have any trades was, you know, back mid-summer. But again, the methodology and, you know, kept me out of very slow price action, which as you mentioned, you were thankful for and I was thankful for today. That’s really all I have to share. My focus has been on crude, one, a single market. And I would encourage new traders, when they come in to this business of trading, to find that one market first and specialize in that before you ever consider adding multiple markets and a lot of additional thought process. Just become an expert in one area first.

Mark Soberman: Yeah, I mean that’s–it’s interesting because we–you know, like we did this webinar today and that came up from a few people. They were saying, “Well, you know, everything looks great, but, you know, with Premier Trader University, I’ve–you’ve given me so many choices, I kind of don’t know where to start.” This is something that we do hear a lot and we really have to work hard to get people to focus in on starting in a way somewhere. You know, it’s interesting and you’re right Brian, people get almost paralyzed when they have a lot of opportunities and they don’t know where to start or they do the opposite, and they’re so fearful of missing out on a trade in one of 10 different markets they can trade that they attempt to do it all in both cases, and unfortunately leads to failure. So, really I think the lesson there is start somewhere and start with a market, focusing maybe in some of the areas that we’re suggesting. These tend to be good places to start overall. So, I think this is probably a good time to segue into our tales from the stupid section or part of the podcast. So, I’ll join you there on the other side with my tail from the studio.

Mark Soberman: Okay. So, now, it is time for us to do a bit of our confessional, which is our “Tales from the stupid.” As active traders, Brian and myself, and maybe all of you or maybe not occasionally maybe make a mistake in your trading, and you know we’re not ashamed to admit it, we definitely do as well. These can be great things, really learning experiences if you take it for that. And in many times, it enables us to sort of share it with our audience and the people, who take our training. So, hopefully, they don’t make some of the mistakes that we did. But recently here, I made kind of almost like a shocking mistake because I’ve been doing this long enough. And it really came down to I was trading silver, and I had a buy execution that I had put through, and I wasn’t really paying close attention. I did not realize that my broker, which in my case just Interactive Brokers, did not execute the buy. And the trade ended up doing wonderfully and rallied up to where I should have been exiting for my profit target, which even more painfully was $750 per contract traded.

And when I went to exit, I realized I had no position. So, what exactly happened there? Well, what happened there was the contract, it was on a rollover day and IB, Interactive Brokers, because that’s a commodity that can be physically delivered, they no longer allowed me even though it was still a trading contract, they were not allowing any executions in my account on that specific month of the Futures. And so, the stupidity there was I just wasn’t paying attention and I didn’t realize that we had rolled that day into the December contract and I was trying to execute. I can’t remember if it was September, October, but I was trying to execute on a contract that still had volume, still was being traded, but I could not actually get the trade to go off, and it ended up being a pretty costly mistake. So, it reminded me once again, that if I’m trading multiple different Futures markets like here we are in September, we need to be aware right now, we’re trading the September contracts. They’re about to roll, so we need to be moving into the December contracts. And you know Brian mentioned crude oil back rolls every single month, you have to be on the rollover.

So, it may seem kind of obvious, kind of basic, but like Brian mentioned before, sometimes trading just one market probably makes your life a lot easier. Me trying to juggle six markets, it’s a bit of a mess with the calendar, but you have to stay on it, and that would definitely be at least for this podcast, my “Tale from the stupid.” Now Brian, I’m going to hand it off to you. I know you have so many to choose from, but, which one did you choose?

Brian Short: There’s that sarcasm again. And Mark to be honest, I only have one this month. So, here it is. I’m going to give you the moral of the story first and then I’m going to tell you a little story. The moral of the story is, “Don’t be afraid to switch brokers when you figure out that things aren’t going execution-wise properly.” Okay? So, let me tell you a little bit of a story here. Myself and one of our coaches, in fact, you’re going to hear from him in a moment, Mike Rykse. We both trade crude oil in the mornings. He trades at a different broker than I do, and I’m not going to name the broker, but you’ll understand why in a second here. This trade goes back just a few days ago and both of us put this trade on to go short at a certain level.

What I found interesting and I know we both placed the orders at the exact same time to different brokers, and what I found interesting was, we were both debating whether this trade was going to work, and it actually ended up working by the way. But it was at a level, you know, above a zero, zero level, which we, you know, find key and supported them right at that level. Anyways, the market slammed to the downside. And what happens in that and what I mean by that, price action just flew through our entry, you know, 20 cents passed it very quickly. And in that situation, you have to expect that slippage is going to occur. Slippage, for those who don’t know, is when you don’t get filled at the entry you wanted to, you know, in this case it was further down. I had four cents slippage on that trade, which may not seem like much. But Mike only had two cents of slippage, that’s 20 bucks versus my 40 bucks.

In the long run, that can add up and the only difference there between the two situations is he’s at a different broker than I am. So, if my point here is, if you see your broker giving you excess slippage on each trade, if you’re experiencing that, don’t be afraid to seek out a broker that is going to give you better fills. And so, how do you figure that out? It’s a little bit of trial and error. In this case, I happen to be, you know, in close communication with Mike and we compared notes. And so, what I am going to give you here is a recommendation for a broker that executes very well, is known for doing a good job, and we get no benefit out of this. It’s simply I want to share, you know, a situation where you can get good execution and the broker is Interactive Brokers and that happens to be the broker that Mike is using.

And Mark I know, you use that broker in all your trading and we’ve experienced a pretty good fills with them. So, that’s my “Tale from the stupid.” Don’t be afraid to make a change when, you know, you’re noticing those kind of things, those kind of issues. And I’ll also add this goes for Forex brokers too. Forex brokers in the past were notorious for making, you know, the market go to price levels that were just unheard of. And I remember years ago battling everyday with Forex brokers on those kinds of issues. It’s not so prevalent now but the–you know, some of the small brokers you can have these issues. So again, if you’re having that type of a problem, don’t be afraid to move your account just, you know, to a broker that’s going to give you good fills.

Mark Soberman: Yeah, really good points on the Forex side in particular, you know, which you mentioned Interact Brokers saying like we just said, we have no relationship with them. They’re not always the most friendly people, but they do a really good job in what you need them to do a good job and that’s execution. And on the Forex side, for instance, I can tell you today running two brokers–actually, three in parallel on Interact Brokers, it was under one half of one pip and spread. I wanted to execute a trade. Another broker was about one and a half pips and another one was two pips. So, you know, where you’re going to get your best overall fill, right, and it makes a big difference when you start adding these things up over time.

And as traders, you don’t have a big enough edge. We just don’t win enough to be able to compensate for big slippage and big commission. So, I don’t know, maybe we need to have a new section called “Name that broker,” “Name that broker,” where we out some of the brokers, who do this. But we’ll certainly think about that maybe they don’t–they shouldn’t always remain nameless if these things are happening. So, now, we’ll sort of segue into our next section which is we–where we talk a little about our genius when it comes to trading.

Mark Soberman: All right. So, I’ll go ahead and start this off. And as you would imagine, Brian, I have so many different possible ways I can go when it comes to, me personally and my trading genius so it’s always difficult to choose just one. But I really give Brian, as you know, a hard time in some of these podcasts. But the reason I do it is not because he deserves really any of it, it’s just he has great comebacks, but they all come like 20 minutes later. So, when we stop the podcast, I’ll start getting IMs and then I’ll get his comebacks and believe they’ll be good. But I just love the little bit of delay that I get.

Brian Short: It’s just because I am such a nice guy, Mark. I just can’t say anything bad about anybody, including you. So, there you go.

Mark Soberman: That’s true, yeah. That’s true. He is too nice for his own good, that’s true. So, really just the simplest form of my genius, and it really isn’t a lot of genius, but it’s we kind of went back, we talked about in the beginning a little bit of getting away from the markets. I’ve learned not to be super high stress in my trading. But being a system developer, being somebody, who has developed a lot of the systems that we have, a lot of the training, I don’t feel a lot of stress in my personal trading, but I feel a significant amount of stress in all of the systems and strategies and training that we put out there. Because I certainly feel a degree of responsibility that I wanted to work wonderfully for everybody, who is involved with Premier Trader University or NetPicks or Keltner Bells or anything we put out, I want people to do well and I do take it personally.

So, getting away from that a little bit is a bit of a life saver and it’s also great for recharging, because it’s always one of those things when I leave the office, I come back, which is fresher and newer and better ideas. I mean Brian and myself, sometimes we even go to some of the trading trade shows, which in recent years, they don’t quite have the glamour or the attendees or really the interest, but it doesn’t matter without fail I always come back from those inspired and with new ideas just having a chance to think about it. And I think for everybody listening, as traders, it’s really hard to turn it off and to say I’m not going to trade on a given day or a given week or two weeks because it’s stressful. What if you miss a great day or a great week or who knows a great month? You know, that can really wear on you. But I’m telling you, it’s going to wear on you even more if you try to just continually trade every single day, every single session, thick or thin, you won’t be able to survive this profession long term.

So, force yourself to do it somehow, even if you didn’t do it this past summer. Force yourself to take some mini trade indications on occasion here in the fall and the winter. We’ll be forced to a little bit with Thanksgiving and Christmas and Hanukkah and New Years and all that but make sure you do that. So Brian, I hand it off to you.

Brian Short: All right. For those that know me, you know that I have a background in computers. I own a computer consulting firm for over 20 years. And one of the things that was drilled into me in that process in owning that business was contingency planning. You know, everything I do in my trading, I have a backup plan for because you just never know when the technology you’re using is going to fail. And I got an example here recently, this happened actually last week. And what I found out later was interesting is it happened to Mike also, I mentioned him earlier, the exact same thing happened to him with a different broker. And here’s what it was.

There was a situation where I was long on crude and the trade was just taking forever, and it just wasn’t going anywhere. It didn’t even get to my first target objective. It was just going sideways. And then all of a sudden, I started to get a short reversal setup. So, like any good trader, I placed my short reversal. It happened to be at the stop of my long trade. And all of a sudden, you know, and it wasn’t two or three minutes after I placed that order to go short, the market turned over and it turned over pretty fiercely. And to the point where I got filled, which was good. There was a little bit of slippage on the trades. I got–you know, taken out of my stop on a long, reverse to short, there was a couple of cents of slippage. But what happened is, the OCO part of the order, and that’s the part of the order that goes live after I enter that short trade, it never went live. And I could tell that it never went live on my matrix, the–you know, the order stayed green. They didn’t execute.

What’s interesting here is, if Mike’s with a different broker, he had the very exact same thing happened to him. So, there was something going on with the exchange. So, the point I want to make here and the moral of the story is you don’t want to panic when you get in those situations. You want to have a backup plan. You want to know what you’re going to do in that case. So, as the trade progressed and it went very quickly towards my target objective, I was trying to actually, after it hit the target objective, I tried to exit out of that trade by hitting the close button on my matrix, but it didn’t work. And I was trying to move the OCO orders around. They weren’t moving. Something was wrong in the exchange communication between my matrix and the actual live trading. What I ended up doing in this case was actually buying at the market to close the order. And I didn’t want to do that too quickly because if those OCO orders went active, you know, they could potentially fill and cause me to be, you know, in a direction I didn’t want to be.

But ultimately, I got out of that trade and it worked out for me that it went like ten ticks past the target objective. So, that’s a situation where it worked in my favor. You know, it could easily have gone against me. The whole point there is have a plan on what you’re going to do. I had the broker on speed dial as I was taking that action, I was on the phone, you know, calling the broker so that they could take action if I couldn’t. And ultimately then, at the very end, I got out of the trade with an extra profit. I did call the broker to make sure that I was totally 100 percent flat that there were no extraneous orders out there. And so, just keep all of that in mind. We are dealing with technology here. Sometimes that technology fails. There are different failure points. There could be your Internet. It could be in this case, it was the exchange that had the issue. Sometimes things are out of your control, but have a backup plan and be ready to take action to control those trades if an error like this occurs.

Mark Soberman: Yeah. And I think Brian it’s something when we started working together early on, you used to preach it to me. And, you know, I mean I listen to it, but I wasn’t always the best detail. I’m still not in preparation like that and you’re definitely right. I mean you really advocated that to me, and sometimes I needed to maybe learn the hard way, but you kind of don’t want to learn the hard way because it can be very painful. So, I know personally, I’ve made a lot of strides, you know, in that area in having redundancy in backup, and knowing what I’m going to do in a variety of different situations because you know what? They all come up. I mean I’m just coming out of what I’ve term “30 days of broadband hell.” And I would never name the provider, Time Warner, who, you know, really caused this. But one of the things that I did, this is really at Brian’s behest was, you know, I got backup, DSL backup AT&T, and I also have even 4G cell phone backup.

I know we talked about this little bit in a past podcast, but what was interesting when we’re talking about this I had yet to go through this. And literally, I had a 30 day long battle with the unnamed broadband provider, Time Warner, about this. And ultimately, we did get it resolved and turned out to be a much bigger issue in the area. Of course, they didn’t believe me for about the first 29 days, but it’s all resolving. And look, it’s not to indict them. I think, you know, really any provider can have problems, you know, when we’re dealing with technology, nothing is a 100 percent. Even the best of the best have issues. I mean before that, I had nothing but, you know, good to say. And then when you finally have something go wrong, it’s like the world is coming to an end so the redundancy and being prepared for it is certainly great advice.

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