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David Hale’s story is one all too familiar to traders with long careers. Cash Rules serves as a cautionary tale to any budding trader. An absolute must read.
David tells his life story, how marriage, divorce, traveling, fatherhood, and more impacted his trading. The author tells a story that many traders do not like to share but is a story all too common for career traders.
The autobiography takes us through his childhood and shows us the underbelly of finance through his experience working at a boiler room. David then finds himself trading at a few Austin-based prop firms and eventually moved back to Europe to start his own trading group. How the plague of extremely low volatility impacted the prop trading world for almost 10 years, in particular “glitch” trading strategies. He even mentions the ominous Schonfeld letter that I shared on my blog. A brief pivot to crypto ICO trading, teaching in Poland, and a short stint as a CEO.
Cash Rules is fun and quick read that is filled with great stories and even better lessons, Hale shows us how traders are beholden to volatility and instills the importance of proper money management.
Amazon Link: https://a.co/d/7Wyej0g
Clippings:
I decided to use this time to write a book about my experiences while trading, not as an obituary to the profession but as an inspiration and a warning to others who might be interested in getting started.
My new bosses understood that healthy competition is a more effective motivator than verbal abuse, so they started rewarding the top traders in each category with a cash prize and other goodies each month. Management did a fantastic job[…]
Just as an athlete needs rest between games and a break in the offseason
In preparation for the winter, the bear is biologically programmed to feast and get as fat as possible during the lush and plentiful spring and summer months. The bear doesn’t know how long or how harsh this winter might be, so every extra ounce of fat might mean the difference between death or survival. The trader should adopt a similar mindset; gorging on profits when the markets are bountiful in order to survive the inevitable lean times. Back in 2008, If I had known the approaching lean times would last for over ten years, I would have concentrated more on feasting
Every trader should have a niche, and I will define having a niche as having a specific trading style and strategies. The problem is that most traders don’t understand the definition of “specific”. Typically, when I ask a trader what their primary strategy is, I hear something like, “I trade stocks that are breaking out” or “I trade Biotechs”. I want to hear something like, “I trade biotech stocks with a high short float that are breaking yearly highs during the first ten minutes of trading” – now that's a niche
Finding a niche can also be a costly process. Losses are inevitable as you develop ideas and invest in some hunches and potential paths to success that don’t work out
John and the rest of the trading crew in Texas also found the going tough. In fact, the whole day-trading industry was suffering. One of the bigger proprietary trading firms, Schonfeld Securities, fired a big chunk of their trading floor and fired off a letter with an ominous warning that sent chills through the industry
couple of years earlier, it would have been tough to imagine going from living the high life in my dream home on the lake in Texas to moving in with my mother-in-law in her small Communist-styled apartment in the fields of rural Poland. It was quite an impressive turn of fortune, and it was all my own damn fault: I had traded like a fool, passed on amazing strategies and opportunities, managed my savings terribly, and operated with no backup plan for when things went sour
attempting to be a professional trader without a backup plan is pure folly–a point that I want to nail into every trader and prospective trader's head. It's like skydiving without a reserve parachute
On the FB IPO: “The day of the IPO started with an ominous sign. We discovered that one of our friends had received an allocation of shares of Facebook at the offering (wholesale) price. A surprising turn of events, since only those well-connected, such as privileged hedge funds, typically receive shares of an IPO at the offering price”
Unlike those traders, I had no escape route. My lack of a backup plan left me trading out my spare bedroom and battling both the market and my own demons. Feeling exhausted and helpless, I started to exhibit some of those toxic habits that I talked about earlier. My back was firmly against the wall, and I started to get addicted to the euphoria and relief that came from the wins in this intense battle for survival. I was running on adrenaline and trading emotionally, in a manner quite opposite to how the successful trader operates
One of my favorite things about trading is that, typically, the happier you are, the better you trade
Overtrading has always been my Achilles heel. Even after over 20 years in the business, I still find it excruciating to sit in front of my computer and fight the temptation to trade unnecessarily
After accepting their answer and coming to peace with the fact that I was either CEO of a criminal enterprise or an inept semi-legitimate business, I decided to just go with the flow and enjoy the adventure
The mood was much darker in Austin, where day trading really did seem on its last legs. These were Texas gunslingers, used to blasting six-figure trading months, and they weren’t willing to settle for grinding out paltry four-figure months like I was.