ALS - Let us get into a little of your background without breaking the rules here. How did you come upon the name of Phantom of the Pits?
POP - It all comes from the respect I have been given in the Pits. I started Pit trading in the early 70's after some early off floor introductions to commodity trading.
ALS - Why did you decide to trade on the floor instead of Up above (off floor with quote machine) as most traders?
POP - I really liked the challenge and excitement of floors trading. The appeal of being in complete control at all times seemed to be a dream of all traders. I certainly felt I could do well on the floor by being in total control. I had a few friends who advised me to buy a membership and get on the floor. It happened so fast.
ALS - We both know you are Phantom at showing up on the floor over the past several years. Can we get into some of your experiences on the floor?
POP - You know we all had so called offices on the floor in the Pits. Each day prior to the market open we would all go stand in our little 3 by 3 foot office. Every day there was this trader named Cindy who would make her office one tier in front of mine.
I remember her name as her career start was as a Math teacher. Her husband was a GM at the music FM radio station I always liked to tune to listen to easy music. I actually knew more about her than she ever knew.
Each day she would wait until she was sure where the market was headed and position. It happened that I was strong into taking profits on the 3rd wave of buying or selling. It apparently was her break out indicator. She would always take my offer below the last trade for selling and before she carded it would say "
I hate trading with you because I always lose when I take your trade." I never forgot that statement which she would make. Losing never stopped her from staying with her plan as she knew to lose small and go with her program.
I am sure she has made lots of funds over the years. I sort of felt bad when she would say what she said but it started me thinking about losing. Her mind was set correctly in trading. Funny how little incidents shape our belief in trading, some good and some bad.
ALS - She was never afraid to take your trade even though she felt she lost from it most of the time?
POP - She had convictions. A lot of the other traders would shut up and back off whenever I would Make Offer. I was starting to pick up a reputation for being correct and the traders would start to follow me.
It actually would hurt my execution and that is where I discovered that EXECUTION is critical. If you can't EXECUTE in getting in, you sure can't execute to get out. It wasn't a mental thing but a hindrance in my trading plan.
ALS - So what did you do to overcome this execution problem.
POP - I started to play games with my trades. Actually the Funds do it now. It is so artificial but they fall for it. It worked like this. If I had a position and I wanted to take profits I would pretend I wanted to add to my positions. So I would Bid the market instead of Offer. I had enough follow me that they too would Bid the market. I would turn the Bid and instead hit the Bid and sell my positions.
ALS - Seems like a good strategy. Did it work most of the time for you?
POP - Well I felt bad about getting the other traders out of position by using this little game so I decided to just hit the Bids when I wanted to get out. If there weren't enough Bids at the last price I would let the market work itself down to a point I was out.
Today the funds must use fades because they must go at the market to position. This is a problem if they don't know the liquidity at the time. In the long run it won't make much difference as short term influence isn't as you would think. I also learned to not stake it all on one price. A long time friend taught me the range strategy. It works for me.
ALS - What did you usually trade at first?
POP - You know the only answer I am going to give you! Anything that moved! By that I mean movement has less risk. You wouldn't think so ordinarily but in a move you can have a smaller position and make a better return. In a dead market you tend to position too large and Wham a news story runs the market and you weren't prepared.
ALS - But don't moving markets chop you around more?
POP - There is integrity about the chop as trends, which develop, give you a good range to work with if you don't get emotional about it.
ALS - Maybe we should interrogate that statement in a later chapter. How did the other traders treat you when you first hit the pits?
POP - They would yell at me to take my profits and to step off of first base. I didn't mind their remarks except one. They would say "well it is only money" and that made me mad as I took it personal when I would throw money away. I started out with such a small amount of money and I couldn't stand to lose money at first.
I got even with the other traders for that remark. I would watch them and when their shirts would expand and their ties were too tight and finally their face would turn red I would yell at them "TAKE YOUR LOSSES!" It wasn't long before we had an understanding.
I actually was doing them a favor in telling them to take their losses. To this day I call this out to myself when the market isn't working my position correctly. The big start of my behavior modification I suppose.
ALS - How have your Pit friends and your recent friends treated you over your trade life?
POP - You know I have just really found out recently how loyal my friends can be. If you do something which they remember it is without fail that they will be loyal to you. They respect me more now than at first. That respect is not just out of trading but knowing that true friends look beyond your face into your heart and soul to find you. It is very touching.
ALS - You don't seem to floor trade much anymore. Is there a reason?
POP - You look on the floor and you see it is a young persons game out there. I am not saying that is the success now because it is more than youth in this business which makes you a successful trader. I trade upstairs because I understand the markets better at a distance and can trade more markets. Being on the floor is limiting as a trader.
A floor trader is more of a scalper than a position trader is. I like the latitude of being able to set up various criteria for different markets and not depend on my own execution in the pit to position.
ALS - Would you give other traders advise to start on the floor?
POP - I am asked for advice often but I don't like to ever give advise. I only like to give guidance, as all traders must make their own bed. They must make their own efforts to learn. It is their decision as to how they will make their plan on trading. I can help guide them away from bad behavior but it is their own determination, which makes them a success.
ALS - Have there been any of your associates over the years who have given you a difficult time in your trading?
POP - Only through ignorance! I can forgive all that. Those who don't learn are their own enemy.
ALS - What must they learn?
POP - Most important they must learn that they don't have to make SELF LEARNED mistakes. They are always better off to learn from OBSERVED MISTAKES. It can be pretty costly to make mistakes in this business. You can not really tell someone what to do but often if you guide him or her they will be more receptive to making the right decision.
ALS - How do you differentiate between self learned mistakes and observed mistakes?
POP - Let us say you go to an eye doctor and he asks you if you can see better out of lens a or lens b. You make a choice and then he goes to the next step by asking you again if you can see out of lens c or d better. This continues until you have the best lens criteria for your eyes.
Well any mistake you make is a self directed mistake and it will hurt only you . No one can teach you not to make this self learned mistake.
Now if you tell the eye doctor you are blind in your left eye when he says cover your left eye and he then says cover your right eye, then you have an observed mistake. You wouldn't make that mistake and since you were affected by that mistake even though it wasn't your mistake you will remember better.
It is better to learn from a mistake which affects you directly that is made by someone else. You have to be mistake aware in trading because there are so many lessons.
ALS - I see. I mean it is clear what you mean on mistakes. Learn from others mistakes and it is cheaper than learning from your own mistake?
POP - I think you have it.ALS - Do you ever go into the pits much anymore?
POP - To sharpen my thoughts on a market and to re-enforce the proper behavior I often do go back. There is always something to learn from it.
ALS - What happens when you walk into the pit?
POP - At the end of the trading day there are those who come up to me an say "I knew it, I knew you would be selling today, I should have known the market was going down."
ALS - So you move the market?
POP - It seems to be their thought but it isn't the case at all. You see if I am selling to take profits I am aggressive in doing just that. It is that I have a position to get out of and it so happens there are others doing the same thing. Maybe they have a signal close to mine.
It is inaccurate to think anyone moves the markets. If they could I wouldn't trade! The truth is that the BEST LOSER is the long term winner.
ALS - One of the traders had some good suggestions on phases of this book. He calls step one preparation. Let us continue in that suggestion from the "Futures Forum."
POP - Suits me fine. I have seen them grow from my early years and I also have loyalty.
ALS - Note: Phantom's criteria for this insight book is to share with the traders on Futures Forum. Final copy will be somewhat different and expanded. This creates a more timely effort in writing his insight.
"The truth is the BEST LOSER is the long term