April 7, 3:23 PM

Dear Denise,

I feel like I have stepped into a new area of understanding. Tracking my emotions by writing down what I am feeling during trading, is making a huge difference for me! I mean, it is FANTASTIC! I am amazed at how many emotional adjustments I do (or desire to do) to my trading. Things I never even realized, except that now I am making a conscious effort to write it down. Like realizing this morning, after I was short YM from 7807… that I had went to “deactivate” the trade as the market jumped back up, but it filled me before I could do that… literally as I was moving the mouse. At the time, I completely forgot the “impulsive” because I was so elated to be short from that area, as it immediately started going my direction… However, had I acted on that impulse, I wouldn’t have been in a beautiful trade as it tumbled 50 plus points.

But now, I realize what was happening to me. My emotions were dictating my trading in ways I never even knew. Especially in high frequency trading. Reading your work, applying it, monitoring myself, writing down my feelings, is really paying off. I am trading less, and making more money. This week and last week have been incredible.

I feel like the light just went on, the eureka moment has happened, and that I am learning to listen to my emotions, instead of trying to be the “Iron Man Trader” with cold, disciplined psyche. Am I emotional, as I write this? You better believe it! I am pumped at what I am learning.

Thanks, thanks, THANKS!

Every now and then someone calls me and asks me to recommend a “prop” firm and now I can just send them to this article -

Surfing the Tsunami, New York Mag, Feb 2 issue

Evidently this is news to the magazine but from my vantage point, this is no different than the desk I ran or the early firms I traded with – Bright Trading, Schonfeld and ETG. There were others, lots of others, in the 1990’s – but the idea is the same – exactly the same. It is funny to read about head and shoulders patterns in New York (not to be confused with The New Yorker) but it is also a bit instructive – favorite stocks, last minute moves, the thrill of the chase….

The markets are ALWAYS a bet against what other people are going to do and Milman, the trader in the magazine, gets that.

The atmosphere is also the same as I remember it at all but Sharpe Capital where my desk was housed within a true market-making firm. Or at Schonfeld… where the wallpaper (and lunch) was amazing.

Entertaining and instructive… when you want to know who you are trading against.

Months ago we said that the complex products known as securitized mortgage products needed to be more standardized so that they could have been exchange-traded. (We admit this would not have been easy but to that we say, were option chains easy when they were first developed?)

Exchange-traded means the market for these packages of mortgages would have included more than the primary players – the banks. Exchange traded means you would have had other time-frame players willing to buy and sell these packages of mortgages. If you had more people willing to buy and sell, some would have been willing to take risk on different segments and at different points in time. That would have given various banks more options simply by providing additional liquidity, it would have prevented the complete lock-up that we ultimately ended up with.

I don’t know for sure what the CME is doing on this … but I suspect that in the future we will see something. How about a regulation that says any new financial product created HAS to be exchange-traded within 3 years. Now… that would be free markets!

Last Friday we all knew SOMETHING was going to happen. But who could have predicted the week that now was? LEH, MER, AIG and even RTC2…. 500 down, 500 up: certainly a time to understand the new science of decision-making!

Early in the week, I had the enormous privilege of attending the CME’s Global Financial Leadership Conference. Beginning with Paul Volker and ending with Burton Malkiel, the 36 hours taught me more than I think I have ever learned at any other single conference.

The question that keeps coming back to me is what if there had been a public market for structured mortgage products, market-makers for credit default swaps? Would we be here now? While DC raises the value of regulation and tends to blame the speculator, all I can think is specs could have helped us avert this problem altogether. Bob Schiller, who wrote Irrational Exuberance and The Sub-Prime Solution, and others at the conference seemed to agree.

Not an easy task, no. But clearly a necessary one.

Thoughts anyone?

Last Friday we all knew SOMETHING was going to happen. But who could have predicted the week that now was? LEH, MER, AIG and even RTC2…. 500 down, 500 up: certainly a time to understand the new science of decision-making!

Early in the week, I had the enormous privilege of attending the CME’s Global Financial Leadership Conference. Beginning with Paul Volker and ending with Burton Malkiel, the 36 hours taught me more than I think I have ever learned at any other single conference.

The question that keeps coming back to me is what if there had been a public market for structured mortgage products, market-makers for credit default swaps? Would we be here now? While DC raises the value of regulation and tends to blame the speculator, all I can think is specs could have helped us avert this problem altogether. Bob Schiller, who wrote Irrational Exuberance and The Sub-Prime Solution, and others at the conference seemed to agree.

Not an easy task, no. But clearly a necessary one.

Thoughts anyone?