Don Miller L BR Slides

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Surviving & Thriving in 2011:

Surviving & Thriving in 2011:
Managing Your Plan AND Yourself for
Managing Your Plan AND Yourself for
Sustainable Success
Sustainable Success
Don Miller
Don Miller
Wednesday December 29, 2010
Wednesday December 29, 2010
Presentation to LBR Group
Presentation to LBR Group
www.donmillerblog.com
Jellyfish Enterprises LLC 2010 Jellyfish Enterprises LLC 2010 www.donmillerblog.com www.donmillerblog.com 2 2
Webinar Agenda
Webinar Agenda
Some Background on Don Some Background on Don
Don Don s 2011 Planning s 2011 Planning
Brutally Honest Brutally Honest Year Year- -End Self End Self- -Assessment of Improvement Areas Assessment of Improvement Areas
No One Else Will Do It, Right?? No One Else Will Do It, Right??
2011 Plan & Priorities 2011 Plan & Priorities
Managing Personal Momentum Managing Personal Momentum
This Trader This Trader s Perspective on the Concept of s Perspective on the Concept of Time Time
Maintaining Perspective Throughout the Year Maintaining Perspective Throughout the Year
A Helpful Performance Scorecard A Helpful Performance Scorecard
Reading Suggestions Reading Suggestions
K.I.S.S. K.I.S.S.
A Bit About Don (Pre
A Bit About Don (Pre
-
-
2011)
2011)
49 Years 49 Years Young Young March 10, 2011 is the key date if you want to send black balloon March 10, 2011 is the key date if you want to send black balloons s
Education: Education:
BSBA Accounting BSBA Accounting - - 1983 Bryant College; Executive MBA 1983 Bryant College; Executive MBA - - University of Wisconsin 1998 University of Wisconsin 1998
Career Career
80s & Early 90s: Progression to Telecom Executive 80s & Early 90s: Progression to Telecom Executive
Late 90s to Today: Independent Trader & Educator Late 90s to Today: Independent Trader & Educator
Active Independent Trader of a Private Fund Active Independent Trader of a Private Fund
90% of Current Balance Grown From Trading Intraday 90% of Current Balance Grown From Trading Intraday
Member of the CME since February 2004 Member of the CME since February 2004
Approx. 3 Million S&P E Approx. 3 Million S&P E- -Mini Contracts Traded Mini Contracts Traded [MF Global [MF Global s largest non s largest non- -institutional volume client in 2008] institutional volume client in 2008]
Business Strategy: Provide S&P Liquidity/Speculate via wholesale Business Strategy: Provide S&P Liquidity/Speculate via wholesale pricing pricing
7 7- -Year CME Career Fund Highlights Year CME Career Fund Highlights [Fully Auditable] [Fully Auditable]
Total Return Total Return 808% 808% - - NOT NOT a boast, but will put principles discussed later in perspective a boast, but will put principles discussed later in perspective
Max Peak to Valley Drawdown Max Peak to Valley Drawdown Early Years Early Years 2004 2004- -2006: 2006: (17.7%) (17.7%) Seasoned Years Seasoned Years 2007 2007- -2010: 2010: (5.3%) (5.3%)
Bested Top CTA Return benchmark for asset class in 2008 Bested Top CTA Return benchmark for asset class in 2008
Industry Publications & Speaking Industry Publications & Speaking
Technical Analysis of Stocks & Commodities Technical Analysis of Stocks & Commodities - - Various 1999 Various 1999- -2010 Efforts 2010 Efforts
SFO Magazine SFO Magazine - - Began Daily Blog Diary 2008: Began Daily Blog Diary 2008: donmillerblog.com donmillerblog.com
TraderInterviews.com TraderInterviews.com - - Founded 4 Founded 4- -Week Live Week Live Jellie Jellie Training Program 2009 Training Program 2009
MoneyShow.com MoneyShow.com - - Portion of Video Educational Proceeds Benefits: Portion of Video Educational Proceeds Benefits:
International Traders Expo International Traders Expo
TradingMarkets.com TradingMarkets.com
American Association of Individual Investors American Association of Individual Investors
Don
Don
(& Everyone Else)
(& Everyone Else)
1/1/2011
1/1/2011
Don Don s 2010 Year s 2010 Year- -End End Brutally Honest Brutally Honest
Self Self- -Assessment of Areas for 2011 Improvement Assessment of Areas for 2011 Improvement
(Eliminate, Improve, or Simply (Eliminate, Improve, or Simply Dodge Dodge ) )
Grinding Markets Grinding Markets Improve/Dodge Improve/Dodge
Getting the 50 Yr Old A.M. Motor Running Getting the 50 Yr Old A.M. Motor Running
Transition from Globex to Intraday U.S. Transition from Globex to Intraday U.S. Improve Improve
9:00 9:00- -9:30AM ET; After 2PM ET 9:30AM ET; After 2PM ET Dodge Dodge
Sustained & Prolonged Focus Sustained & Prolonged Focus Improve Improve
Occasional Motivation & Boredom Occasional Motivation & Boredom Improve Improve
7 Year Itch 7 Year Itch ; The ; The Now What? Now What? Years Years
Tao of Poker Rule #286 Tao of Poker Rule #286
You You re not playing poker (trading) any more re not playing poker (trading) any more you you re just throwing yourself into this zombie re just throwing yourself into this zombie- -like state like state
It It s possible to get lost in the game itself s possible to get lost in the game itself to go too far inside it to go too far inside it
Energy Management Energy Management
Shutting Down/Taking Vacations Shutting Down/Taking Vacations Improve Improve
Cutesy Markets (i.e. DAX) vs. Bread & Butter ES Cutesy Markets (i.e. DAX) vs. Bread & Butter ES Eliminate Eliminate
Playing Playing Small Ball Small Ball on High Probability PJOs on High Probability PJOs Improve Improve
Teaching vs. Personal Trading Balance Teaching vs. Personal Trading Balance Improve Improve
Excessive & Sloppy Slippage via Premature Entries, Excessive & Sloppy Slippage via Premature Entries,
Scratching, & Re Scratching, & Re- -Entering Entering in Low Volatile Markets in Low Volatile Markets Improve Improve
Tao of Poker Rule #270: Tao of Poker Rule #270:
A Little Past Playing Good is Playing Badly A Little Past Playing Good is Playing Badly
This peculiar geography of poker can be frustrating, because jus This peculiar geography of poker can be frustrating, because just as the player has arrived at a certain level t as the player has arrived at a certain level
of expertise, he finds that by simply thinking ahead one more st of expertise, he finds that by simply thinking ahead one more step ep he can be back once again in the he can be back once again in the
territory of territory of bad play bad play. This trap is very subtle, and it can suddenly appear, as if o . This trap is very subtle, and it can suddenly appear, as if out of the blue. You can go ut of the blue. You can go
one step past your own expertise one step past your own expertise . .
Don 2011 Priorities
Don 2011 Priorities
Same as Every Year Same as Every Year Improve as a Trader & Person vs. Prior Year Improve as a Trader & Person vs. Prior Year
Manage Weaknesses on Prior Slide, Including Manage Weaknesses on Prior Slide, Including
Initiate 9:00 Initiate 9:00 - - 9:30am In 9:30am In- -Office Exercise Routine Office Exercise Routine
Kill Two Birds with One Stone Kill Two Birds with One Stone
Re Re- -implement Performance Scorecard implement Performance Scorecard
Will Discuss Later Will Discuss Later
Substantially Reduce Eurex Trading Substantially Reduce Eurex Trading
Trade ES vs. Illiquid DAX Trade ES vs. Illiquid DAX
Jitterbug Jitterbug Rhythms: Energy & Focus Zapping Rhythms: Energy & Focus Zapping
Too Much Too Much Small Ball Small Ball
DAX Minimal Contribution to Bottom Line DAX Minimal Contribution to Bottom Line
Negative Negative when considering when considering loss of focus loss of focus impact on Bread & Butter S&P P&L impact on Bread & Butter S&P P&L
Transition to Photon Order Entry Platform Transition to Photon Order Entry Platform
Automate Existing Key Strategies Automate Existing Key Strategies
The Brain & Reflexes Will Turn 50! The Brain & Reflexes Will Turn 50!
Chart Chart- -Based Trading Based Trading
I I m very much a m very much a Visual Visual trader trader
Inject sense of Inject sense of Newness Newness
Like Painting the Walls a New Color Like Painting the Walls a New Color
Don 2011 Priorities
Don 2011 Priorities (Cont.) (Cont.)
Improve Transition From 1990s Improve Transition From 1990s- -2010 Ultra 2010 Ultra- -Aggression to a 2011+ Blend Aggression to a 2011+ Blend
of Capital Preservation, Growth, & Income of Capital Preservation, Growth, & Income
Preservation & Growth Preservation & Growth (via Trading & Equity Trailing Stop): (via Trading & Equity Trailing Stop):
College & Retirement Funds College & Retirement Funds
Met Age 50 Goal of 100% Self Met Age 50 Goal of 100% Self- -Funding via Aggressive Trading Funding via Aggressive Trading
Growth & Income Growth & Income
Separate Smaller Account Separate Smaller Account
Fund 100% of Cash Flow Needs Age 50 Fund 100% of Cash Flow Needs Age 50- -60 via Trading 60 via Trading
Donate Any Excess to Charity Donate Any Excess to Charity
Take One Sabbatical (Last One: 2006) Take One Sabbatical (Last One: 2006)
Continue to Continue to Pay it Forward Pay it Forward via Education & Charity via Education & Charity
This Industry Continues to Sorely Lack This Industry Continues to Sorely Lack Substantive Substantive Education From Proven Traders Education From Proven Traders
Kudos to Linda & Team LBR Kudos to Linda & Team LBR
Continue Ongoing Continue Ongoing Industry Transparency Industry Transparency Mission Mission
Via real Via real- -life blogging & education life blogging & education
Successes, frustrations, challenges Successes, frustrations, challenges good, bad, ugly good, bad, ugly
Further Develop Leading Further Develop Leading- -Edge Training Techniques Edge Training Techniques
Continue/Increase Charitable Giving from Proceeds Continue/Increase Charitable Giving from Proceeds
Better Balance with Personal Trading Better Balance with Personal Trading
Limit Limit live multi live multi- -week efforts in 2011 week efforts in 2011
The Jagged Upward Zig The Jagged Upward Zig- -Zag Graph to Success Zag Graph to Success
Tao of Poker Chapter 18 Tao of Poker Chapter 18
Tao Rule #259 (Dealing with Large Wins, Runs, or Tao Rule #259 (Dealing with Large Wins, Runs, or Big Stack Big Stack Poker): Poker):
You You d like to sit on your winnings and never go downward from this p d like to sit on your winnings and never go downward from this point oint
forward. But somewhere in the back of your mind you realize the forward. But somewhere in the back of your mind you realize the truth: truth:
There There s nowhere to go but back to the world of risk, where things may s nowhere to go but back to the world of risk, where things may very very
well go down before going back up again. well go down before going back up again.
Going forward, known at this trader Going forward, known at this trader s desk as the s desk as the Don Miller Rule Don Miller Rule
A Word to Those Who Have
A Word to Those Who Have
Climbed the Mountain of Success
Climbed the Mountain of Success
A Reminder (To Self) That We A Reminder (To Self) That We re re
Playing the Playing the Continual Continual Game of Game of
Managed Managed Risk Risk
One Word: One Word: HUGE HUGE
Markets Have Momentum & Pace Which Markets Have Momentum & Pace Which
Must Be Understood & Managed Must Be Understood & Managed
Obvious, Right? Obvious, Right?
You You Have Momentum & Pace Which Also Must Be Have Momentum & Pace Which Also Must Be
Understood & Managed Understood & Managed
Highly Individualistic & Will Vary By Trader Highly Individualistic & Will Vary By Trader
Typical Momentum Typical Momentum Rules Rules Apply to Personal Momentum Apply to Personal Momentum
Don Don t Fight the Tape t Fight the Tape
Milk the Trend Milk the Trend
Protect Your Momentum Protect Your Momentum Trade Trade with Stops to Reassess with Stops to Reassess
Expect Periods of High Energy, Consolidation, & Chop Expect Periods of High Energy, Consolidation, & Chop
Trade Trade YOUR YOUR Momentum Momentum NOT NOT someone else someone else s!! s!!
Managing Momentum
Managing Momentum
Jesse Livermore, Nick Jesse Livermore, Nick The Greek The Greek , Archie Karas , Archie Karas
And Thousands of Others And Thousands of Others
All All at One Time Known as The World at One Time Known as The World s s Best Best Speculators Speculators
in their Field, having accumulated tens of millions in their Field, having accumulated tens of millions
Livermore was the believed Livermore was the believed trader trader described in described in Reminiscences Reminiscences
of a Stock Operator of a Stock Operator
All All Eventually Lost Eventually Lost Everything Everything
In Livermore In Livermore s case, he committed suicide after not being able to: s case, he committed suicide after not being able to:
Keep to his Rules; and Keep to his Rules; and
Adapt Adapt to changing conditions/regulations to changing conditions/regulations
Managing
Managing
Personal
Personal
Momentum
Momentum
Managing
Managing
Personal
Personal
Momentum
Momentum
Aligning Self with Market Aligning Self with Market
Market Opportunity
Intensity
Time
MONSTER
PERFORMANCE
Personal Rhythm:
(A) Strong Focus; Minimal Health Issues,
Distractions, or Non-Mkt Obligations
(B) Polar Opposite of (A)
INCLUDING GOOD TRADERS!
FLAT OR LOSING
Trader Purgatory
TAKE-AWAY
Performance is as
much if not
MORE about
personal rhythm
as it is market
rhythm.
Nurture &
Protect It!
The Zone
2001-03, 05, 07-09
Portions of
2004, 06, 10
Know Yourself Know Yourself
My My #1 Rule #1 Rule in All Trading: in All Trading:
When Things are Going Well, Get Bigger When Things are Going Well, Get Bigger
When Not, Get Smaller When Not, Get Smaller
Took the LONGEST for me to (1) Implement and (2) Improve Took the LONGEST for me to (1) Implement and (2) Improve
Not Not Master Master
Floored the Accelerator 2001 Floored the Accelerator 2001- -2003, 2005, 2007 2003, 2005, 2007 - - Early 2009 Early 2009
Scaled Back Significantly 2006, 2010 Scaled Back Significantly 2006, 2010
Periods of Lost Focus, Health & Periods of Lost Focus, Health & Life Life Issues, and Personal Rhythm Issues, and Personal Rhythm
Alternating between the accelerator & brake is the Alternating between the accelerator & brake is the primary primary reason for the fund reason for the fund s s
strong return vs. draw data strong return vs. draw data
ALWAYS ALWAYS have an equity curve have an equity curve Reassess Point Reassess Point (trailing stop) (trailing stop) in place in place
Livermore, Karas, etc. DIDN Livermore, Karas, etc. DIDN T!! T!!
Karas Karas - - in a rare 2008 Interview when asked what his biggest mistakes w in a rare 2008 Interview when asked what his biggest mistakes were ere said, said,
Obviously, not pulling up at some point. Obviously, not pulling up at some point.
Personal Personal Reassess Point Reassess Point Hit twice during my Career, including during the 5/6/10 Hit twice during my Career, including during the 5/6/10
Flash Crash Flash Crash
Assessed the Reason Assessed the Reason
Hunkered Down Hunkered Down & Scalped Like Crazy & Scalped Like Crazy
Replenished capital each time via Replenished capital each time via Trading Trading and and NOT NOT fund replenishment fund replenishment
Managing
Managing
Personal
Personal
Momentum
Momentum
High up in the North in the land called Svithjod, there High up in the North in the land called Svithjod, there
stands a rock. It is 100 miles high and 100 miles wide. stands a rock. It is 100 miles high and 100 miles wide.
Once every thousand years a little bird comes to the rock Once every thousand years a little bird comes to the rock
to sharpen its beak. When the rock has thus been worn to sharpen its beak. When the rock has thus been worn
away, then a single day of eternity will have gone by. away, then a single day of eternity will have gone by.
-- -- W Written by Hendrik Willem Van Loon ritten by Hendrik Willem Van Loon
& referenced in Don & referenced in Don s 1/17/09 blog post & s 1/17/09 blog post &
inside cover of the 2009 NY Expo Directory. inside cover of the 2009 NY Expo Directory.
Concept of Time
Concept of Time
Traders Traders MUST MUST Perceive Time Differently Than Others Perceive Time Differently Than Others
Trading Gains or Losses Trading Gains or Losses Only Only Do One Thing Do One Thing
Purchase or Consume Purchase or Consume Time Time
Trading is Essentially a Remote Control Trading is Essentially a Remote Control
With it You Can Fast Forward, Reverse, or Pause Time! With it You Can Fast Forward, Reverse, or Pause Time!
Time Isn Time Isn t Money t Money Money is Time! Money is Time!
In trading, you can earn the equivalent of a In trading, you can earn the equivalent of a normal normal job job s: s:
weekly income in a single trade sequence weekly income in a single trade sequence
monthly income in a single day or week monthly income in a single day or week
year year s income in one week or month s income in one week or month
career career s income over a few years s income over a few years
Concept of Time
Concept of Time
A Single Trade, Sequence, Day, Week, Month,
A Single Trade, Sequence, Day, Week, Month,
Year, etc. BY ITSELF is completely irrelevant
Year, etc. BY ITSELF is completely irrelevant
Only
Only
the accumulation over time is relevant
the accumulation over time is relevant
Said another way
Said another way
Keeping Perspective
Keeping Perspective
Each dot represents a single Each dot represents a single
day day s actual results over an s actual results over an
extended span of time extended span of time
Within each dot may be 5 Within each dot may be 5- -20 20
trade sequences trade sequences
Above Green Line = Positive Above Green Line = Positive
Think about this the next time Think about this the next time
you you high five high five or or stew stew over a over a
trade result! trade result!
Always think to yourself: Always think to yourself:
Tomorrow, I Tomorrow, I ll generate ll generate
another another dot dot somewhere somewhere
on the chart. on the chart.
Afraid of Afraid of generating generating all those all those
dots below the line including the dots below the line including the
large draws?? large draws??
Strive to minimize, but they Strive to minimize, but they re re
absolutely NECESSARY to absolutely NECESSARY to
generate those above generate those above
No Risk = No Reward No Risk = No Reward
Net Sum of all dots?? Net Sum of all dots??
> $2 Million > $2 Million
Keeping Perspective
Keeping Perspective
Non
Non
-
-
Numerical Performance Scorecard
Implemented as an Experiment for Q1 09 to Implemented as an Experiment for Q1 09 to tighten tighten things up after some bad habits crept in Q4 08 things up after some bad habits crept in Q4 08
Experiment Result Experiment Result
Win/Loss: Win/Loss:
# Days # Days 58 58- -3 3
Daily $ Daily $ 11 11- -1 (Both Personal Qtrly Bests) 1 (Both Personal Qtrly Bests)
Subsequent Worst Personal Decision Ever as a Trader? Subsequent Worst Personal Decision Ever as a Trader?
Abandoning the Abandoning the Experiment Experiment after Q1 after Q1 DUH! DUH!
Bottom Line:
It Works!
Non
Non
-
-
Objectives:
Determine Whether Its You,
The Market, or Both
Highlight & Monitor Areas of
Weakness
Provide a Visual Record to
Reinforce Confidence
De-Emphasize Numerical
Results Especially Daily!
Force Personal Accountability
You find out life is a game of inches. And so is You find out life is a game of inches. And so is
football. Because in either game, life or football, football. Because in either game, life or football,
the margin for error is SO small, I mean one half the margin for error is SO small, I mean one half
a step too late or too early, and you don't quite a step too late or too early, and you don't quite
make it. One half second too slow, too fast, you make it. One half second too slow, too fast, you
don't quite catch it. don't quite catch it.
Al
Al
Pacino
Pacino
-
-
Any Given Sunday
Any Given Sunday
The inches we need are EVERYWHERE around us. The inches we need are EVERYWHERE around us.
They're in every break of the game, every minute, every second. They're in every break of the game, every minute, every second.
I'll tell ya this ... in any fight, it's the guy willing to die I'll tell ya this ... in any fight, it's the guy willing to die who's who's gonna gonna
win that inch. And I know if I'm going to have any life any more win that inch. And I know if I'm going to have any life any more, ,
it's because I'm still willing to FIGHT and DIE for that inch. it's because I'm still willing to FIGHT and DIE for that inch.
Because that's what LIVING is. Because that's what LIVING is.
The six inches in front of your face. The six inches in front of your face.
Said Another Way
Said Another Way
The line separating

The line separating
true excellence
true excellence
from mediocrity is
from mediocrity is
razor thin
razor thin
.
.
2011 Book Suggestions
2011 Book Suggestions
If I could ONLY read two
If I could ONLY read two
Trading
Trading
books:
books:
A Final Word on Patterns
A Final Word on Patterns
(From Don (From Don s 2010 NY Expo Presentation) s 2010 NY Expo Presentation)
Everything I Ever Needed to Know About Market Rhythms, Everything I Ever Needed to Know About Market Rhythms,
I Learned in I Learned in Trading Trading Kindergarten Kindergarten
( (Not quite, but you get the picture.) Not quite, but you get the picture.)
Breakouts Lead to Trends Breakouts Lead to Trends
Trends Lead to Extremes Trends Lead to Extremes
Extremes Lead to Backing and Filling Extremes Lead to Backing and Filling
Backing & Filling Leads to Backing & Filling Leads to
Consolidation Consolidation
Consolidations Lead to Breakouts Consolidations Lead to Breakouts
Wash, Rinse, & Repeat Wash, Rinse, & Repeat
Said Another Way
Said Another Way
K.I.S.S.
K.I.S.S.
and Execute!
and Execute!
Final Words on 2010
Final Words on 2010
Trading is a game ... nothing more. It pales in
comparison to life's true priorities, and simply provides
us with the analogy of all analogies, and parable of all
parables. It provides us with a unique practice field on
which we can learn and then try to apply the principles
to life. The better we trade, the better we live, and the
better we live, the better we seem to trade.
If someone ever tells you you can't, they're dead
wrong. If you're breathing, you can and you will.
Regardless of what the pundits say or how much the
temporary pain may sting, don't ever let anyone take
away your spirit and joy for life.
Tonight, we all dance. In part for the joy of personal
victory, but for all, the survival of 2010 and the
possibilities of 2011. If youre reading this, then youre
still breathing and I congratulate you. You made it. And
you're a year smarter.
Excerpts from Dons 12/31/08
A Night to Dance Post
Forgive
Forgive
Yourself for Any 2010 Shortcomings
Yourself for Any 2010 Shortcomings
2010
Missed Trades Bungled Exits
Brain Cramps
Woulda Shoulda Coulda
2011
Oh, the Possibilities!
Oh, the Possibilities!
Thank You & Let
Thank You & Let
s Rock in 2011!
s Rock in 2011!
don@donmillereducation.com
don@donmillereducation.com

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Surviving & Thriving in 2011:

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