In past posts, I have tried to
describe the
qualities that I have observed among very successful traders.
I've also attempted to outline specific
steps that traders can take to make themselves more successful.
In this post, let's make the discussion more concrete by taking you
inside one of my visits with a trader I consider to be among the
best in the world.
The name Marc Greenspoon won't be familiar to you unless you've
read my book
Enhancing Trader Performance
. He doesn't speak at
conference events or advertise himself as a guru. What he does do
is trade every day of the week, average between 50 and 100 trades
per day in the equity indexes, and make millions of dollars a year.
Not just one year or two years, but year after year. He
doesn't trade with a mechanical system, and he doesn't trade with
quantitative research. Nor does he manage a portfolio. He trades
with his mouse and his computer, accounting for several percent of
the day's total volume all by himself.
I'm grateful to Marc for giving me permission to write this about
him, because it illustrates the sheer level of skill needed to be a
great trader. Imagine the commissions of trading so frequently,
even given the lower commissions available to a trader at a firm
that is an exchange member. Imagine how the slippage adds up over
the course of, say, 80 trades in a day. Now realize that Marc's
profits are
after
the costs of paying for
his overhead at Kingstree Trading, his trading firm, after all the
slippage, and after all the commissions. He would be a fine trader
simply by trading that often and breaking even at the end of a
year! To make millions of dollars a year, year after year, trading
that frequently makes it transparently clear that markets are not
random.
Marc called me on Friday and asked, "What are you doing today?" He
wanted to set up a meeting. Friday didn't work, but Margie and I
had plans to be in Chicago on Saturday, I told him; we could meet
then while markets were closed. Sure enough, Marc was up early
Saturday morning to greet us.
What did he want to meet about? He wanted to review his first
quarter performance and set goals and take specific steps to
improve during the second quarter. Not that his first quarter was
bad. He made a significant amount of money, certainly in keeping
with his past earnings.
But he knows he can do better.
That's one of Marc's defining features. He's not just an expert
trader; he's a
continually improving
trader
.
Marc studies himself as diligently as he studies markets. His daily
journals, religiously kept, go back years in notebooks that are
always at his side. Sometimes he illustrates a point for me by
going back to an entry in last year's notebook. He knows the
entries--and the markets--that well that he can jump back months
and find exactly what he's looking for.
Similarly, Marc keeps a large TV monitor and recording device in
his office. He records his trading day by capturing everything on
his trading screen, and then he archives each day for reference.
The screen shows how the market was trading at the time, where he
placed his orders, and where he entered and exited trades. At times
Marc will get excited and go back to one of the recordings to show
me a specific moment in a specific day's trading. He knows the
market so well--and his own trading--that he selects the right day
and fast forwards to the right spot in the tape.
Quite simply, he's reviewed so many more of his performances
than other traders that he's learned more than others. He is a
one-man study in
implicit learning. And it's all driven by his desire to
improve.
Also by his side are small dictation devices. Marc records his
thoughts about his trading and then plays the tapes for review.
Many of the tapes focus on what he needs to do to make himself
better.
He never trades better than when he is
thoroughly disgusted
with his own
performance. Listening to his first tape, my first thought
goes to Coach Bob Knight--another professional who hates losing and
is driven to win.
Indeed, there is similarity between Marc and Coach Knight. Both are
aggressive competitors who wear their emotions on their sleeves.
Both are generous to a fault and inspire both admiration and
loyalty. And, yes, both can push the envelope too far in
frustration and sheer determination. If non-emotionality were a
necessary ingredient of trading success, Marc would have gone belly
up long ago.
But Marc succeeds for two other reasons:
1) He knows that winning is guaranteed to no
one
. Look at it this way: let's conservatively say
Marc trades 60 times per day with an average of 400 contracts per
trade. That's 24,000 contracts per day. It's also about 6,000,000
contracts per year. Do the math: if he makes several million
dollars in a year, his edge is far less than a single tick of
profit per contract per trade. That razor thin edge, replicated
many times, is what makes him a success. It is like the razor thin
edge of a NASCAR champion, battling with his pit crew for every
fraction of a second. All it takes is a small flip to turn that
small positive expectancy into a small negative one and put a
trader like Marc into severe drawdown. Marc knows that. That's why
he calls me. That's why he keeps recordings and journals.
He
works as hard on himself as on his trading. Indeed, for Marc,
those are one and the same.
2) He has the support of a superior
organization
. To use one of Marc's phrases, he has
"balls" when he trades.
But that is, in part, because he has a
boss who has the brass ones. Chuck McElveen, also featured in
my book, makes it a point to develop large, successful traders. If
you don't have a goal of making a very solid six or seven figures a
year, Kingstree isn't interested in you. (Of course, if you don't
have a track record of success with smaller size, Kingstree isn't
going to enable you to trade thousand lots in the ES contract.
Indeed, you wouldn't even get hired.) But once a trader is
successful at one level, Chuck encourages a raising of size.
A
trader like Marc can take risks because Chuck can take risks.
As a firm owner, he understands that
you only learn to
take risks by taking risks
. You only learn to trade
large by growing your size.
Marc is living proof that
you don't need a huge edge to be successful, but certain factors
are necessary for success. You do need to have an edge; you
need the consistency to replicate that edge; you need the drive to
continually adapt to changing market conditions; and
you need enough capital
. I have never met
a successful trader who makes money by doubling his or her money
every year. The successful traders start with meaningful capital
and earn a respectable, but reasonable return upon it.
Their success is measured in their consistency, not in
their ability to make occasional big scores.
The
small trader who tries to make millions is forced to take undue
risk by trading imprudent size. When the inevitable strings of
losing trades occur--as they do for the greats--the account cannot
weather such drawdowns.
If you have the drive of a Marc Greenspoon to trade tick by tick
every day, review markets in video, keep journals and audio
recordings, and sustain a learning curve,
just focus on
sustaining profitability. Don't try to develop a mad edge.
Instead, sustain the edge you have and then seek out those
organizations that will bankroll your success. Marc is a constant
reminder for me of what can be accomplished with determination and
skill. For that I am both grateful and proud.
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18 comments:
Thank you Dr. Brett! This is a fascinating post! (But then again, most of your posts are fascinating …)
I'd like to ask you, out of curiosity, a little technical question: could you give us an idea how much time approximately Marc Greenspoon spends daily (or weekly) on his trading-related activities? I mean including everything: trading, studying, reviewing, planning. Thanks again.
I read the blog daily and have taken many good things from my readings but this was one of the more fascinating stories I've read.
Thanks
Great question, Jeff. I know he spends time daily before and after the trading session reviewing his performance, and I know he usually takes a break midday. My sense is that the time before and after the trade, spent productively and with focus, add up over time into good learning. But Marc definitely has a life. He's not spending every nite pouring over charts, doing research, etc.
Brett
Thanks, Mike. It's a little bit like Market Wizards. Seeing a successful trader first hand makes a greater impression than listening to theories of trading from educators who may be far from the action--
Brett
Thanks for sharing Brett. It shows that living off the finest of edges is possible if you have the right qualities.
I'm really impressed with his relentless analysis of the self in the context of trading the markets.
Hi Caravaggio,
You put it beautifully; thanks for the note. He does indeed engage in relentless analysis. A lot of people talk about "passion" for the markets, but few display such passion in their actions.
Brett
Brett, I have read about Marc in your latest book and I admire such traders for their relentless pursuit of excellence through sheer hard work and not forgetting relaxation to recharge as trading can be draining ..........
Nothing great is achieved without perspiration.
Hi AnaTrader,
Much, much, much of success is due to persistence; you're absolutely right. Thanks for the comment--
Brett
Grind and Grind and Grind and Grow. I think that is a lesson I see repeated by the successful gals/guys all the time. Nothing sexy, no homeruns. Just grind and grow.
Hi Misstrade,
I think Marc would agree with you. He often describes himself as a "build your P/L" type of trader.
Brett
Dr. Brett,
What futures contracts Mark trades and what is his typical size ?
Regards,
Jim.
Hi Jim,
He trades equity index futures; mostly of the U.S. markets. His position size varies considerably, but averages in the hundreds of contracts. One advantage of being at a proprietary trading firm is that you can trade size. It's difficult to imagine someone making the kind of money Marc makes trading a handful of contracts at a time.
Brett
Dr. Brett,
I trade myself typical 10 contracts in the E-mini's.
I called to the CME exchange to ask if the speed of execution is dependent from the size traded but they couldn't answer.
Could you ask Marc if on average a 800 contracts trade takes more time to get filled than a 100 contract trade ?
Thank you,
Jim.
Brett,
What kind of video recording device does Marc use to capture his trades? Also, does he manually write in his journal or does he use a computer journaling device?
Thanks,
John
Hi Jim,
If you're going at the market, size of order won't affect the time it takes to get filled. It could, of course, affect the price you get, depending on the depth of market.
If you're working an order, then, yes, you may not get filled all at once depending on where you're at in the queue. That, in part, will depend upon your pipes to the exchange and how the market trades.
Brett
Hi John,
Marc manually writes in his journal. I don't know the brand of videorecorder, but I can tell you it's expensive, with a very large hard drive. That enables him to archive many days' worth of data.
Brett
The edge (0.004) is far less than the bid/ask spread (0.25 for es).
May I ask which order type has Mr. Greenspoon used, Market or Limit?
Thanks!
Dr. Brett,
I used to make markets for NASDAQ stocks in the go-go 90's and my fellow traders and I did exactlly what Greenspoon does. We traded hundreds of thousands of shares each day in the hopes of making a little bit on each share. The guy that sat next to me likened it to "picking up nickels in front of the bulldozer". The reason we were so successful was we had essentially unlimited capital and we were flat at the end of the day. The average trader in our room was making $500,000 per year and some were making 7 figures. We didn't need to spend a great deal of time analyzing the markets; we just had to see what was going on right now and buy or short. If we were right, we'd get out in seconds or minutes. If we were wrong, we'd get out in seconds or minutes. Most of us were right about 80% of the time on where the stock was going in the next minute or two. We were pathetic on forecasting any time frame longer than that. This method will always work but you need to be fearless and not worry about the money. The money always comes.
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