Now Reading
Trading Like Bob Ross – On Acid
98

Trading Like Bob Ross – On Acid

by Trading GangsterMarch 14, 2019

 

Greetings denizens of Evil Speculator! As you may know, Mole is taking a well deserved vacation this week at his secret castle in the remote regions of France. Meanwhile, I’m here to fill the void for a few articles to inform, inspire and entertain you.

A little about me – I’m a professional proprietary trader, which means I have a Series 57 license and trade with a prop firm here in Chicago. If this is the first time you’ve been exposed to proprietary trading (i.e. prop trading), what that means is we are a firm of traders that trade our own proprietary strategies.

As prop traders, we trade both our own accounts and house accounts with a lot of leverage. How much? For day trading it’s typically 10x – 20x intraday versus 4x for a standard retail account. Options are 2x versus 1x for a retail account.

That probably sounds like a lot, but the risk controls are much greater than in the retail world to ensure I don’t blow up my account (or the firm’s account!). If you’re a day trading gangster and crushing it, prop trading will probably add A LOT of extra R to your trading account. I’ll touch more on this in my next post.

My trading consists of day trading stocks and primarily non-directional option trades. After many trials and tribulations, it’s my belief that a chart trader will never out gun a well designed suite of quantitative algos. Not shockingly, all of my day trading is automated in python and fairly complex. Sitting in front of the computer all day and staring at charts it not something I ever want to do.

I started on my trading journey about 5 years ago and went from knowing nothing to being one of the more sophisticated traders in a prop firm. When my interest in trading started to warm, I turned like any enthusiastic idiot to Google for answers on how to trade. In retrospect, this is the single biggest mistake any aspiring trader can make.

My first real trading course I took was a $3200 day trading course at Van Tharp, followed by two days of live trading for an additional $2500. Counting my airfare, car rental and deluxe Econolodge accommodations in Raleigh, NC let’s call it $7k all-in for 5 days of total day trading instruction.

 

You are correct in probably thinking that’s a lot. However, this is only the beginning…

Why did I choose Van Tharp? Well based on his book sales, I assumed he was very credible and knew what he was doing. I mean, he has a real printed book on Amazon (not an e-book) and a Super Trader program that costs $80k. So his courses MUST be legit?

Pay attention to the dynamic and you’ll see this magic trick used repeatedly in many disciplines: a guru publishes a real book on Amazon to establish credibility and then upsells people absolute shit from their website. This is heavily abused in the trading world. Not by everybody, but by most.

I arrived late on the first day of the and missed the first 15 minutes of the class. Over lunch, a couple of others filled me on what I missed: the instructor introduced himself and stated his average monthly trading profit was 80R. That’s eighty. 80. Not a typo. 80R PER MONTH.

Immediately my bull shit detector was pegged and on the offensive. For real yo? 80R per month?

All of us were now suspect. In the two days of “live” trading that followed, there was a white board in the front of the room where the guru posted the P&L for his trades. The result of two days of trading? 23R.

All of us took turns watching him trade and noticed he didn’t even have any brokerage account open on his computer.. these weren’t even paper account trades. They were all theoretical trades done on StockCharts.com. Smoke and mirrors.

In summary, the guru makes 80R per month on average and just made 23R in two days of trading. The dude must be tripping..

Apparently, he was tripping, because this is one of the charts used to demonstrate his techniques:

My first thought: this looks like PBS favorite Bob Ross is trading while on acid. WTF is this?

On the level of sophistication of traders, I’d put myself in the top 1% of traders… I went to engineering school on a math scholarship. Linear algebra, support vector machines, Kalman filters –  bring it. I’m comfortable wrapping my head around complex subjects. But this?

A group of us from the class banded together and decided to test all the techniques taught in the class. We traded them both manually, as taught in the class, and automated using TradeStation and MultiCharts.

Most of the techniques were straight forward to test and to avoid any programming bias, we put together a document detailing the specifications of the trading techniques. We then turned this over to TradeStation programming guru Bill Brower to properly code the strategies (despite our suspicion, we really wanted them to work).

After months of working on these strategies with this group of traders, 2 years on my own, 1100+ of my own real money live trades of straddling break even, we all came to the same conclusion: this was total horses shit bamboozlement. I was out $7k, a few YEARS of chasing the dream and 1000s of hours essentially torched.

Why did it take me so long to throw in the towel when there was overwhelming proof that 95% of the course was total shit? I couldn’t believe someone offering an $80k trading program would offer this as part of their cirriculum. I couldn’t grasp how much harm is being done to people’s lives with this bull shit.

Of the 4 of us who worked on these strategies, 2 of them were in the Super Trader program. I can’t imagine the disappointment after putting $80k into a trading education program and untold hours, flights, hotel rooms and car rentals. And this is the horse shit they send them off to trade with? My heart goes out to them.

In a different circle of traders, someone mentioned to me that Van Tharp doesn’t believe in back testing. I wonder why!?!?!?

And this is magic trick number 2 used by supposed gurus: you just haven’t spent enough time practicing using these techniques. You need some more classes and coaching. You just haven’t struggled enough, you just haven’t put enough time in, you just don’t get it. Spoiler alert: YOU WILL NEVER GET IT.

Finally I made a decision: it was time to bite the bullet, stop fighting the sunk cost bias and start living in reality again: I had wasted $7k and 1000s of hours of my life chasing something that would never work. It’s over, time to move on.

And that’s where I’ll leave things for today. In the next blog post, I’ll share phase 2 of my trading journey on the path to redemption from retail trading idiot to professional.


About The Author
Trading Gangster

  • Jason13

    Cool post…Thanks!

  • Jason13

    And hey Gangsta, are you Mole’s contact for setting up his LAMM services?

  • TradingGangster

    I’m not familiar with LAMM.. I did co-develop VIXEN with him.

  • Jason13

    Ah ok. Thanks.

  • james

    super cool thanks

  • Sp00nman

    Very cool TG! Thanks for sharing your story, I look forward to reading more. Are there any books that you can recommend to people looking to start and build a “system” for a retail trader?

  • TradingGangster

    I’m going to go over this in detail in my next post.. The short answer is it depends on your math and programming skills. If they are on point, I’d consume Ernie Chan’s books. If you don’t want to spend years of your life learning linear algebra and python, I’d learn to trade options on a non-directional basis.. i.e. condors, butterflies, calendar spreads.

  • BKXtoZERO

    In between posts I let tvix go for a 0.35 ding. Not liking what I see

  • Sp00nman

    Much appreciated TG. I will check them out. I picked up “Stock on the Move” by Andreas Clenow and it’s pretty good. I took linear algebra in college which I will brush up on and don’t mind investing some time learning python. I know it’s not going to be a get rich quick scheme and I need to invest some time into this (years proly).

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • bankwalker

    Thanks Gangster …

    but really … only 7k? … How did you manage to get off so easy?

  • BKXtoZERO

    Wow..Great post. Thanks! I look forward to hearing more.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • TradingGangster

    I’d start with Learn Python The Hard Way, you can get through 2-3 lessons a day, which is what I did. Once you finish it, I’d start poking around on Quantopian and try cloning existing strategies and playing with them, using your new found python skills.

  • zzezzezz

    Great post! Thanks

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Thank you so much for covering for Mole. I will begin to explore the books and complex options. I do have a math background from college with a BS, plus some programming from the DOS system time in Fortran for 5 years. Have been stuck in accounting for many years, but tired of that. Ready to start a new chapter. Thanks again for all your information..

  • Jason13

    Word on the street says some huge Vix call buying happening right now. FWIW.

  • bankwalker

    what street?

  • bankwalker

    did you read the comments under that stack overflow article?

  • Jason13

    Anywhere Rd.

  • Julie 35 – 25 – 36

    Thanks Gangster Looks like we must wade thru OPEX week then a direction SPX The bounce this a.m YUP off 10 min lower Ichi Cloud boundary I day traded the bounce up to the upper 10 min cloud boundary Shown SPX 10 min chart https://uploads.disquscdn.com/images/f9f64c4b8bdc6e4f28c6296adde62167bf7ed48ab5ffca6723eaabefc60f48dc.png
    JULIE

  • bankwalker
  • Julie 35 – 25 – 36

    I will post some LEVEL 2’s if anyone is interested for day trading The LEVEL 2’s on the nose today matching exactly the 10 min Ichi Coud boundaries
    LEVEL 1 2814.17
    LEVEL 2 2809.80
    2807.11
    2802.74
    2795.62
    2784.25
    2775.01
    2765.76
    2754.34
    2747.27
    2742.91
    2740.21
    LEVEL 1 2735.85
    JULIE

  • TradingGangster

    You need to take these things in context.. in other words the call buying might involve someone who is short VIX in some capacity or needs to balance their portfolio of positions. So often times it doesn’t mean that someone thinks that the VIX is going to sky rocket, rather it’s just a leg on a more complex trade.

  • BKXtoZERO

    Got back in tvix 26.65…tight. Up a whopping .20

  • BKXtoZERO

    Nice job on your gold stock short yesterday. Let me know when lower cloud on BKX is zero

  • Julie 35 – 25 – 36

    You are on BK … $BKX to Zero !
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • zzezzezz

    Ordered the Chan books. I’ll brush up on my Python skills.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    which part? the search is only from the rich countries?

  • BKXtoZERO

    You just never know. I show up dann near everyday and see what happens.

  • bankwalker

    no … the results were based on how many questions were asked about each language ..

  • Julie 35 – 25 – 36

    Guys SPX Negative divergences daily chart RSI and MACD NOW the daily 5 ema approx 2795 and a LEVEL 2 listed below @ 2795.62

  • Sp00nman

    I did not, thanks GG. I missed one of those links.

  • Mark Shinnick

    Entered some shorting a bit earlier, aggressive adding to shorts upon objectives. We are just screwing-around here in area of volatility support, so that’s vulnerable.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    When it comes to gold, I developed a system of a nice fitting average.
    around that average, I created a (gray) neutral zone.

    Sometimes, gold just doesn’t know what the hell it’s going to do.
    fair enough.
    So I created a neutral zone, where I don’t sit on the proverbial fence.

    BL,
    you can see around 4.80 that gold reversed.
    That’s why I mentioned ‘bump your head’ yesterday.
    I didn’t know it would happen, just that it ‘might’ happen.
    We could have arisen this morning and gold been on a tear upward.
    in this case it did not. Your trade was correct. It just didn’t work out this time.
    Next thousand trades.
    https://uploads.disquscdn.com/images/32bf867542d3f8521f8f864090bb4e607f73b1ca5f4c1a77e5b61c9433cd9153.png
    -GG

  • Julie 35 – 25 – 36

    Yes GG Plan the trade and trade the plan
    JULIE

  • Jason13

    Of course.

  • BKXtoZERO

    If we can’t believe in Van Tharp what can we believe in….. No more trade logs about how I feel about my trade. I thought Mole was into Van Tharp but that was years ago.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    Van tharp is the guy selling shovels to gold miners?
    https://self-made.io/selling-shovels-gold-rush-10-companies-got-rich-big-economic-trends/2357/

    Van tharp is the Michael Bloomberg of WallStreet?

    (shock, cries, and wails of gnashing teeth)

  • BKXtoZERO

    Dividend website says there is no date announced for next payment on IYR….and that there was no increase last year…..and actual real estate is softening. My math…1+1+1 = some kind of disappointment.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Mark Shinnick

    Things have become so psychotic, most every model is targeted for circularity and psychological defeat. I respect what you do because in the modelable highly-reactive emotional playing field of volatility, when the unmodelable mood is happening, this favors a situationlly-adaptive operator.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    GG A mistake that traders make with divergences You must use closing price to draw the lines
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ok. that’s what I thought.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • BKXtoZERO

    You are a wordsmith! Ya….when they can’t hold their system together vix pays fast. The trick is to keep it mostly intraday unless up. If I show up every day and climb on their backs…eventually I catch them getting weak. I imagine how hard it must be to be them….to hold that pile of shit up every day in the face of news….events…data…

  • Mark Shinnick

    Its pretty rarefied talent and one hell of a lot of discipline….looks like v support getting undermined here.

  • Mark Shinnick

    Damm great artists…smoking…drugs, gone b4 their time.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    smoking & drugs.
    correlation does not equal causation.
    LOL!

  • Mark Shinnick

    Yes…don’t you wonder who’s not paying attention.

  • ridingwaves

    That was a great post trading gangster……those gurus are in every vertical it seems….

  • ridingwaves

    words on the street are about as good as trash talking in basketball, better back it up…

  • BKXtoZERO

    Ooooot tvix. .15 ding…holding small… O.5R

  • BobbyLow

    I think Mole still uses some of Van Tharp’s stuff. I never took Van Tharps course but I did get a lot out of reading one of his first books about system building. I also spent about a year corresponding back in forth with Scott Phillips who I believe took Van Tharps course. I would put Scott'[s trading skills up against anyone.

    OK now here is where all this stuff turns to Bull Shit. First of all, I could never trade like Mole. I also could never trade like Scott or any of the master traders still trading. The main thing that I learned from Scott is that I don’t have to trade like anyone but myself inn order to have decent results in this business. Decent results are relative as in “beauty is in the eye of the beholder”. Personally, I gave up my visions of grandeur of making millions in the market shortly after the tech bubble burst.

    Now maybe some of you are mathmatical geniouses that can adapt a quant system that makes you millions and I hope you do. However, I believe that a lot of people fail when they are under capitilized and do not have the staying power to survive drawdowns. And even those that begin with a large stake become disillusions betting big and their large stake becomes a small one in short order.

    Let’s not ever forget that Trading is one of the most difficult things that anyone can ever choose to do and getting to be a top 1% Trader is about as difficult as it can get for many reasons to numerous to mention.

  • Jason13
  • https://evilspeculator.com Sir Mole III

    Hey guys – I arrived at the castle. It’s awesome here 🙂

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    pics!

  • https://evilspeculator.com Sir Mole III

    I have adopted some of this ideas/concepts but make a point of back testing and verifying everything! Just like Tony did it – because that’s how it’s done. Always open to new ideas but if I can’t verify it with cold hard stats then it’s nothing but academics.

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    wedgies are things that just haven’t turned into channels, yet.
    he he he.

  • BKXtoZERO

    I think mole sent an overview of van Tharp out. That is where I recall the how you feel about your trade log stuff. It all sounded good to me and as much as I joke about it I DO think about it on every trade. I know when I am hoping rather than speculating….how good a set up is…when to push larger position sizing… I am just sorry to hear about the actual van Tharp results. I have little faith in TA and basically admit I know nothing about the future. My lens is an amalgam of things and the rest is price being right or wrong.

  • BKXtoZERO

    As posted below…much of it sounded good and has stayed with me

  • BobbyLow

    Hey RW, I’ve been waiting for you to come on board to tell you that I just got back in the Bio Ring which I know is your wheelhouse. I’ve been searching and searching for another horse and just completed another test on Bio and I think I can make it work this time with LABU/LABD. I’ve traded these before but I’ll be using a different format going forward.

  • BKXtoZERO

    Storm the Castle for me Sir!

  • Jason13

    Sometimes that’s true.

  • Jason13
  • BobbyLow

    You’ve probably had mixed results over the years but I think for the most part you’ve done pretty well doing what you do – especially being limited on what you can trade. I think you’re also pretty much trading the same things over and over again and so am I. Although some might say this can lead to recency bias, I think a little recency bias can be a good thing ad keep us out of more trouble than we would get into without it. 🙂

  • BKXtoZERO

    My wedge on ES didn’t play out as a wedge. It fell out of it but just hung around…so strong hint that it is not a wedge huh?

  • Yoda

    If you smell something bad during the night, get up and leave 😉

    https://i.redd.it/e4xx3jh18sn11.jpg

  • BobbyLow

    Yep this is the way Gold trades. I took the trade off at BE so at least I didn’t have to pay for the reminder of just how much trading Gold can suck with a system that is dependent on sustained runs of more that a couple of days. Anyhow, I’ve taken my Gold horse out behind the barn and shot it. LOL

    Now in trying to add another sector that might work with my system I’ve added Biotech which will probably give me indigestion more often than not but at the same time at least give me an opportunity to make some money. My system could be profitable trading gold but the profit ratio using my system is so low that it’s not worth the agravation to trade it.

  • Sp00nman

    Yep BL, I’m not disillusioned into developing a system that makes me rich and pulls alpha out of the market every day. I’d gladly settle for beating the market and trying to avoid big downturns in the market. If I could develop something that steadily compounds savings so I could retire when I’m ~60 that’d be great. I’m no math whiz, some of the heavy math starts to make my head hurt.. lol The math behind SVM’s is brutal, but the concept is really cool.

  • https://evilspeculator.com Sir Mole III

    Someone asked about the LAMM service – send me an email to admin@ and let me know what you are interested in.

    @GG you’re learning python? Well I’ll be damned. I can definitely point you in the right direction when I’m back. Have a cool video series for you that drops you right into python for finance examples. You’ll love itl

    Great to see so much excitement here today as the quant side of trading is going to be the future for Evil Speculator as well as another yet to be announced platform.

  • https://evilspeculator.com Sir Mole III

    The castle has been sacked! I’ve settled on two virgins to do my bidding tonight (unless my wife complains).

  • https://evilspeculator.com Sir Mole III

    Will do – probably later this week as it’s supposed to rain for the next three days here.

  • sutluc

    Thanks for the post, got my attention.

  • Jason13
  • Sp00nman

    If you could share that video series with us that would be much appreciated!

  • https://evilspeculator.com Sir Mole III

    It’s definitely coming and then some. Tony and I have been working hard behind the scenes in preparation of some major initiatives. It’ll be a completely new concept that will give retail traders access to quant trading systems.

  • bankwalker

    At the moment, the wall holds …

  • Ronebadger

    I wish I had a nickel for every time I said “at the moment”…

  • Mark Shinnick

    So…there’s the breakdown of local vol support.

  • BKXtoZERO

    He he he he… added to my IYR short at the open, DRV 7.18, also long TVIX rt now 25.5

  • Mark Shinnick

    Your in the path of a freight train by the looks at the moment anyway.

  • BKXtoZERO

    IYR nice reversal, VIX, (maybe) TBD

  • Mark Shinnick

    Its a very logical drv entry area, to be sure,

  • https://evilspeculator.com Sir Mole III

    Hey guys – I’ve got decent Internet today and am working on a post. Lost track of time exploring the castle!

  • Mark Shinnick

    Any keyholes to look through ?

  • BKXtoZERO
  • Sp00nman

    I can’t help but wonder to what extent the price action last cpl days is due to opex. I’m thinking it has a lot to do with it.

  • Mark Shinnick

    …takes a shitload of patience for these sort of setups with tight stop potential.

  • BKXtoZERO

    Ya, they are already trying to come back. Felt great for 5 minutes… gap and sell, still has a shot here

  • http://gerb-reloaded.blogspot.com Gold_Gerb

    don’t forget the dungeon. it’s not legit, without a dungeon!

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • bankwalker

    funny you should mention that …

    I just finished reading this:

    http://quantifiableedges.com/the-bearish-aftermath-of-quad-witching/

  • https://evilspeculator.com Sir Mole III

    PLENTY!!!!

  • https://evilspeculator.com Sir Mole III

    NEW POST!