Equity runs missing or incorrect—the list is endless.Then there were the fist fights, guys having sex in the office during trading hours, or it would be somebody’s birthday and the ownerwould have two or three strippers show up.Alcohol abuse was a constant. One time I’ll never forget. Someonewho was losing badly in a trade simply couldn’t take it anymore andthrew his quote screen right through the window of the office ontothe sidewalk of LaSalle Street several floors below. He started trashing the entire office until the biggest guy in the place hit him in theface with a telephone and knocked him cold. It’s a wonder no one waskilled. Can you imagine being on the phone trying to solicit clients ortrade intelligently when stuff like this is happening?We would have to cut down all the redwoods to make enoughpaper to talk about what happens when these children disguised as
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brokers would trade. There were the constant debits, trades being downwithout margin of any kind, trades with the wrong account numberon the ticket, no one fixing the problem, or even knowing about it fordays or until the client with that account calls up saying “I didn’t dothis trade.” Then, of course, the broker was not in the office, on vacation, or not even employed there anymore. Or they can’t find the ordertickets. Or there are no order tickets to find. The constant “I said buy,not sell” errors, “size of the trade” errors, someone completely forgetshe has positions on and blows up without even knowing about it untilthe clearing firm calls; if the call was ever put through. Brokers needinga commission so bad they would trade new client accounts before thecheck from the client even cleared the bank; of course it’s a loser. Whenthe broker tells the client it was a loser, the more enterprising clientswould stop payment on the check; you should see the fur-fly whenthat happens. Inept brokers doing spreads but putting both sides on inthe same direction; or getting out of spreads the same way.2 Brokersforgetting they had “good till canceled” stops active in the market untilthey get filled, then deciding to keep the trade in order to “See whathappens, maybe it will be a winner.” Brokers doing trades withoutcustomer approval, getting approval for one trade but doing another;getting approval to go long but changing their mind and going shortwithout telling the client. It just goes on and on and on. Reliving allthis is making my head spin.The point I’m making with all of this is that it would never end.This happened constantly everywhere I worked. It still happens everyday all over Chicago in all those little brokerage houses that solicitcash from the public. I would put up with this insanity in one form oranother until I couldn’t stand it anymore and go someplace else. Butit was always that way. I simply couldn’t accept that this kind of dailyadversity would be something I would have to endure if I expected tobe a “professional commodities broker.” The industry is just that way.It really doesn’t matter if the adversity is self-created, imposed on youby others, or simply how you chose to interpret market price actionagainst you. If you are in this business, without a doubt, you will suffer.I’m sure one reason so many people wash out of the trading environment is because they can’t handle or can’t accept the constant adversity.It doesn’t matter if it is the kind I went through or the kind others go
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through. It’s almost like a trial by fire. You can’t get “it” (whatever “it”you are looking for) until you pay some kind of price to the markets.If you find a way to get through it you will prosper. If not, well—they’ll just stack your body up with all the others.As you can see, when I was in the process of discovering this formyself, I had some very frustrating experiences. There are other kindsof adversity in other parts of the business.All of what I endured taught me life lessons that, in the long run,made me better equipped for anything that might come my way. Myeyes were opened for that. Today, I can tell instantly when a situationis about to go south. That comes out in my trading; it helps me cutlosses faster. That’s why I feel that everything contributes to your trading from every part of your life—past, present, and future. Everythingyou go through will teach you something about the nature of reality, asit really is, instead of how you expect it to be.Trading the markets cannot be done well unless you understandthe nature of the reality they function under. If your eyes are open toan infinite number of possibilities then nothing can surprise you orcatch you unawares. By looking at trading the same way, you can “see”the whole picture. What to do next becomes self-evident. But to getto that point, you must first have enough experiences of what life isnot. The more pain you go through, the more you should ask yourself,“What is life trying to teach me?” Once you have learned that, andtrained your mind to accept every new lesson, trading becomes easier.At some point, once you know why you do what you do the way you doit, trading is effortless. I had to learn to do that instead of expect somechart to tell me what to do. Pain is the only megaphone loud enoughto get past your preconceptions.In my particular case, I had to accept that my idea of what a professional is and does is not in the same reality of the other market participants I was exposed to. I had to conclude that since that was the wayit was, pulling money out of the markets was still possible, even if whatthe markets really are is nowhere close to what I first thought theywere or the people who are involved in them.I’d like to share the final adverse situation I went through. This oneis slightly different because I had some control over the results. Afterthis experience I still had problems with brokerage houses and my
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trading but the knowledge that I could win became absolutely unshakable. Up to this point, I felt that I was at the mercy of those who mightbe further ahead than I was. By that I mean they had more money towork with, they had better leads, they knew the business better, theycould trade better, or any number of reasons.By going through this next situation, I came to understand thatinside of me was a winner. I was no longer at the mercy of circumstances. I didn’t have to see the business the same way. I didn’t have tobelieve somebody else’s point of view or put up with anyone’s insanity.I matured as a businessman and with it I learned how to create success in a world that didn’t function as I thought it would. It set thestage for ultimate trading success because inner reality that is firmlyrooted can adapt to any situation or circumstances. Success is a state ofmind. You then adapt that state of mind to the needs of the particularsituation that you chose to explore. A successful pilot is no differentthan a successful rock climber. Both possess the same inner world thatis expressed in two unique ways. Each environment has particular partsthat need more of one thing and less of another. Either person couldlearn to do the job of the other if he so wanted to and have similarresults. On the inside they possess the same raw material.This last adversity taught me that by doing what I knew wouldwork, I could achieve what I wanted. I learned there was nothingwrong with me deep inside, only in my choices up to that point andthe way I chose to look at things. I learned that the business could giveme what I wanted. In fact, it would have given me what I wanted soonerif I had been able to grasp its true nature sooner.After I had made the choice to focus exclusively on learning to bea true trader, I had a problem. I was flat broke. I had nothing. The latestbrokerage house debacle left me in the same position that I had been inseveral times before. This time it was different because I had chosen notto go back into the same cycle, if I could avoid it. But I didn’t knowexactly what that meant except that I didn’t want to be involved withanymore psychos. I carefully thought this through. If I had no moneyand lots of financial pressures, nothing would solve that problem exceptcash. To get cash I needed to work. I carefully considered if I shouldtake a break from the markets and find something else to do for a shorttime. Should I quit completely?
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After much thought here was my decision: I would go to workfor a brokerage house and raise cash to develop my trading presence. Iwould alter my selling approach to be fairer to the client, and I wouldonly sell a market I believed in. I concluded that I must find the moststable brokerage presence possible until I had enough cash to be onmy own. Sooner or later it was clear to me that I would stop workingfor anyone else, for any reason. I decided to no longer subject myselfto those sorts of external adversities if I could avoid it. From then onany employment was just temporary. I decided to do it my way. SinceI was seeing this situation from a new perspective I had new choicesand new possibilities. Before then being on my own didn’t occur to mevery seriously because I thought, why reinvent the wheel? I thoughtthat the glut of brokerage houses dominated the market and that business only worked one way. I figured I could eventually find a “good”brokerage house. I thought the owners knew something special or wereconnected. I thought it was very expensive to do. Why go through thehassle? Why compete with them? What I didn’t know was that they,the brokerage houses, were very easy to start. It cost next to nothingto do. Most of the owners were just six-year-olds with a checkbook. Iwas certainly smarter than they were. Since they come and go so fast,that should have told me something. I thought it was just bad luck.All kinds of things became very clear. Starting my own company thatI could run my own way became the goal. This sounds simple, but forme, I hadn’t really considered it as being the solution to at least part ofthe problem.By now it was January 10 of that year. I had no idea how to starta commodity company or what it would cost, but I knew it cost morethan I had because I was penniless. I made a few phone calls to clearing firms and asked how to get started. Within two days I understoodhow to start a company and the costs. I found a lot of options; everyone had a slightly different program. All anyone needed, besides fillingout the right paperwork, was a phone and a few sales leads. No wonderbrokerage houses come and go so fast and are typically run by morons.Any moron could do it. I figured if they could do it, I could too.I actually ended up one step better because I found a company basedin Oregon that had a branch office program. They did a lot of advertising on CNBC, had direct floor access, great lead flow; all the expenses
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I had no idea how to pay for. I would only be a branch office insteadof my own show, but for where I was it was close enough. Lookingback, I was setting myself up for another career reversal because all mypaychecks had to come through this company, but at the time I tookthe risk. The owner promised me no funny business over the money(a lie). We filed the necessary paperwork and I was in business.But there was a problem. I had no office, no phone lines, no tollfree inbound number, no marketing or sales material, no trading equipment, no quote service, no order tickets, no fax, no money, no nothing.My bills were way behind. My rent was behind. I couldn’t even affordbusiness cards. It was a dilemma. Here I was about to do somethingtotally new to me in this business with absolutely no resources at all.I borrowed $200 from a friend (he wasn’t sure about more given mycondition), and convinced the owner to advance me another $1,000against my expected commissions. He also sent me a stack of accountforms and faxed me 500 sales leads to the public fax around the corner. I went over to the CME and begged the publications departmentto give me 25 copies of the “Foreign Currency Futures & Options”brochure. They gave me 15 and made me pay for them. In just a fewdays, I had sales material, a stack of leads, and a chance to make thiswork like I thought it could be done. Better yet, I thought I could doit reasonably free from interference. With the money I had borrowed,I probably bought myself 12 days of time before all hell broke loosewith creditors, my landlord, the phone company, and so on. Talk aboutbeing on the edge; I was scared. I had no idea how to sell without hypeof some kind. I didn’t know if there would be some rule I wasn’t following as a branch office that would bring the “trading police.” I didn’tknow if people could understand trading in foreign currencies. Whatif I couldn’t sell this? What if I couldn’t learn fast enough? I was doingsomething completely different than I had done during my entirecareer. At that moment I had no assurances any of this would work. I hadless than two weeks to recreate my entire concept of the markets andgenerate commissions. Since I had gone through the heat of the fire somany times, at least I knew what not to do.I can’t emphasize enough in this short description that I was reallyscared; completely full of anxiety about the results. If it all blew upI would end up on the street in the middle of winter. Have you ever
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been through a Chicago winter? On top of that, I wasn’t sure whetherI could handle another failure or the humiliation. Try looking forwork in that state of mind in any business. I was afraid that if I failedI wouldn’t be able to get any job anywhere. If I failed, it looked likethe end for a very long time unless I made it work. Don’t forget I wasstill recovering from losses in crude oil during the first Gulf War. I still hada hundred grand or so left to pay on the debit. I was under pressure.I carefully set up my office right there on the only table in myapartment. To put this in perspective, let me tell you about the apartment I was in at the time. I was living in an SRO, a single-room occupancy hotel. It was officially a hotel and they had daily, weekly, andmonthly rates. Some people call it a transient house. It had its share oflowlifes, hookers, and lunatics. One day there were shots fired down thehall (while I was working). Somebody actually died in the lobby onenight. In that respect it was like being in a brokerage house—anyway, atleast I felt at home. It wasn’t hell but you could see it from there. Onlymonths before I had been living in a penthouse apartment, but now Iwas so broke it was all I could afford. It was either the SRO or movein with a girlfriend, but I had enough pressure on me. Looking back, itwas the fact that I had nothing to lose and everything to gain by tryingthat really fired me up. After everything was in as much order as I couldmake it, I took inventory of where I was. Every minute that went bywas a minute closer to being on the street. I had to make it happen.I hit the sack to get a good night’s sleep. I set the alarm for 7:00 a.m.The next morning I got up and the power in the building went out.Luckily, my phone still worked. I had no idea if my phone would beshut off, or if the power would come back on. All I knew was that I hadto work fast. I didn’t really know how much time I had. After a quickshower in the dark, I called my buddy (Guy #1 from Chapter 2) andasked him to fax me a chart of the daily Japanese Yen futures and thecurrency preopening comments. I went over to the 24-hour public faxto pick up my “research,” got some candles at the Walgreen’s, grabbeda Starbucks coffee with the last dollar to my name, and headed back tothe “office” to get to work. On the way back I really thought I must becrazy. Was this business really worth it?By the time it was about 9:00 a.m., I was ready to start selling—bycandlelight no less. I picked up the phone and called the first lead. Isold my heart out. I dialed like a madman.
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Anybody walking by my room must have thought I had gonecompletely over the edge to hear me working in there. At the end of thefirst day, I had three bona-fide potential clients for currency trading. I didthis for 12 straight days, 12 hours a day. My buddy faithfully faxed memy “research” daily. Because I didn’t have a quote system when I traded,I felt like I was trading in the dark (actually really in the dark—the powerwould go out all the time). My buddy gave me quotes every 10 minutesno matter how busy he was. He wanted me to win. He knew the wholestory. By the end of those 12 days, I had opened three accounts for a totalof about $18,000 in equity. At the end of those 12 days, I had done about$1,800 in commissions (my end). At the end of those 12 days, my threeclients had about a 7 percent gain on their accounts after fees. It wasFebruary 1. Payday was the tenth. Everybody had to wait until the tenth.My first check was for $800 because I had to reimburse the owner forthe loan he gave me. That $800 check meant more to me than any othercheck that I have ever gotten. I just prayed to God it didn’t bounce. I haddone it. Scared out of my wits and up against more adversity than maybeI could handle, I had what it takes. I wasn’t out of the woods yet, but Icould see the edge of the forest. I just hoped a forest fire wasn’t comingnext. As the days rolled by, I kept at it nonstop. Within 90 days I was wayahead. I had come back from the edge.The reason this is so significant to me is very simple. Because I hadnothing to lose, I had everything to gain. During this time I foughtdaily with the fear of failure. I fought with the anxiety of trading without the tools I had come to rely on. Because believing I could winwas so firmly in place in my mind, I did win. When your back is upagainst the wall you can only do one of two things—quit or fight likehell. When you fight like hell, hell takes a walk. I had demonstrated tomyself I could win in tough circumstances. I had learned that to makemoney trading doesn’t require a whole lot of stuff. In fact, it was easier.I learned that the business doesn’t have to be like a special educationkindergarten class. A committed soul can achieve anything. The experience became the turning point in my confidence level. I never question or second guess my trade conclusions today. I trust myself to dothe right thing all the time. My mettle was tested. I know now thatas long as there are markets I can profit from them. It’s through theprocess of doing it right and winning that the inner reality can expressitself. The result is the same—profits.
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Being a trader means taking money out of the markets all the time.I needed firepower to do it. Since I had none, I needed the public’smoney to get there. I am eternally grateful to those clients who sentthe cash during that critical time. They provided me a chance to seewhat I could really do. Their confidence is part of the story. I’m sure ifthey really knew what I was up against on a personal level, they neverwould have done it. Would you?The story doesn’t end there. The owner of this company was nodifferent than any other. Because I had no real control over getting paidor maintaining my registration, this whole thing went under too. But itwasn’t because of my choices, my effort, or me—and not before I hadproven to myself that I could remain a consistent winner both in themarkets and in the business. I became bulletproof and would eventuallyremain a net winner.
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Chapter 5
The Meaning of LifeExistence Without LimitsAbility has nothing to do with opportunity—Napoleon Bonaparte
H
ow’s that for the title of this chapter? Notice how short thischapter is. It is so simple to me, and I hope I can communicateit to you. In a very basic sense that was what I found withinthe markets and the people who are involved in trading and supportingthose markets. Have you read God in the Pits by Mark Ritchie? I didn’tfind God. I already knew who He was. I think I found what God is tryingto tell everyone of us through this whole experience. I think those whoonly view the markets as simply a financial pursuit are missing what it isreally all about. Let me provide you some details.
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When I was young I knew something was different about me.I came to know that “different” means “unique in a personal way.”What I didn’t know is that each of us is that way. We are all uniquein some way. Therefore, we are all equal in some respects. We all havestrengths and weaknesses that express themselves (sometimes withoutour knowledge). When I was younger I paid lip service to this idea.Because of the hell I put myself through, I came to learn what thatreally meant. When I said “different,” what I discovered during myformative years when comparing myself to others (which I don’t do asmuch anymore except to find a similarity) was “You are all the same.I am superior to you.” I believed this for good reason. Don’t mistakewhat I tell you next as an attempt to inflate my own ego in any way. Ihave come to see my strengths as really a weakness if I am not careful.If you put together six months or more of 100 percent winning tradesyou could easily get cocky and miss something that leads to a loss. Myself-image and self-concept doesn’t rely on my gifts anymore. I didn’tcreate these advantages. I was only entrusted with them. How couldI take credit for them? If someone else doesn’t have these gifts, theywill have something that I wish I had. I don’t view that person as lesserbecause he or she lacks something that I have, or better because he orshe has something I don’t. I see it as completely different now. Anyway,let me show you my starting point:I was a gifted child. Anything I touched would work out the way Iwanted it to. I was always in the “smart” class at school. I was given special work to do to keep me from being a problem with the other “smart”kids. I would understand things very fast. I was reading at the collegelevel in fourth grade. Sometimes the teacher would give me a task thateven he thought was very complicated, certainly way beyond me. I woulddo whatever it was so fast they (the teachers) all thought I had cheatedor somehow already knew the answers. I was always taking I.Q. tests orperception tests. Inkblots were my favorite. (Boy, I made their headsspin.) I was always frustrating people, which I secretly found very funny.(“You’re just jealous.” )Once my high school geometry instructor really tried to put oneover on me by giving me a problem to do. He said, “Here’s a problemfor you. I want you to write a proof for the trisection of an angle. Useany angle you want. Have it for me by Friday.” I said, “No problem.” I went
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to work and by Friday I turned in my proof. He didn’t tell me thattrisecting any angle was one of the “impossible” problems in classicalgeometry. We weren’t that far along in class. In classical geometry youwere not allowed to use any other tools except a compass and a straightedge, and you were not allowed to mark the straight edge in any way.Every theorem or postulate used in your proof had to be a proven theorem or postulate based solely on the intrinsic fact of some mathematicalreality (2 + 2 = 4 always) or some geometric reality (an endpoint of aline can never be anything else but an endpoint because that is what anendpoint is). After my teacher read my proof—and had his friend, thehead of the mathematics department at a university review it—he toldme that was the closest anyone had come in the past 2,000 years. I haddone this in three days. It wasn’t completely provable for some reasonthat I had missed, but the fact was my basic train of thought was there.I even built a successful liquid-fueled rocket engine for a scienceproject completely from scratch. At 12 years old, by reading books, Ihad done something on my own that the best engineers at RockwellInternational, Martin Marietta, or NASA had millions of dollars to do.I did it basically as well as they could. No wonder the Air Force wantedme. I was also a MENSA member for a period of time, although I quitwhen I discovered the so-called smartest people indulged themselves inthe most deluded fantasies you could imagine. I could go on, but youget the point.I went to a Midwestern college and studied music. When I got fedup with university life, I entered the business world. I was always theonly guy they ever hired who didn’t have an “education.” That didn’tmatter. I would produce some degree of success, get bored, and moveon. I interviewed really well. I got so good at it the person doing theinterview would always have me meet “the boss,” who just naturallyliked my “enthusiasm” or whatever, and I would usually get the job.No matter where I went things would happen. What I didn’t discoveruntil later is that when anyone begins to do something well, but hasonly been there a month or two, people gravitate to see “what they aredoing.” They want that success for themselves. The small-minded onessee you as a threat (that’s a different issue). When “the boss” noticeswhat you are doing he puts you in line for a promotion or something.Or even offers you a job with him. “Always looking for good people,
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you know?” You can find yourself getting somewhere with very little“real” performance behind you. Especially if you have a reputation oryour résumé says “Air Force Academy Appointee.”This happens in the markets all the time. Just look at all the registered CTAs who do okay with $30,000 for six months, publish their“track record,” have some brokerage house raise a million or two forthem, and proceed to blow up in the next six months. Looking back,much of my initial success had very little real effort to it. At the timeI thought it did; but in reality I was constantly being noticed or working closely with others who thought exactly like I did. They were all“whiz kids” in some form or another, and wanted other “whiz kids”around them. We were all working in the same environment that valuedthat particular train of expression. We were all working on everythingtogether and eventually, between all our skills and talents, we wouldproduce a profit in some fashion for ourselves or someone else. We wereall entrepreneurs working with other entrepreneurs. As time went onand I would move around from one idea to another, or some projectto another, my list of successes would grow. People who had “jobs”would constantly say things like: “Wow, you did that?” or “You meanyou can actually make money selling soap?” (I was in AmWay forawhile.) The natural thing for me was “success.” It had never been anyother way for me, in anything I have ever tried to do. I just thought Iwould always be in that frame of reference. Can you see how it wouldbe easy to expect that to be the case?As I said in the beginning chapters, the trading environment isnothing like that world. The people in the markets are nothing like that.The fact I had to learn was that my giftedness made no difference here. Itwas actually a hindrance. I won’t spend time rehashing how I came todiscover this.Here is the end result: I came to understand that the ability tounlearn everything you know, or have learned, or you think is important, is the only skill you need to start the process of trading success.The horror of giving up everything you know is what most peopledon’t really want to face. I didn’t want to believe it either. I ran fromthat. I had to finally accept, after I couldn’t run from it anymore, thatwhat I thought was so important about my very nature, that which wasthe only skill I knew led to other skills was the real reason behind my
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past failure in the markets. How could this be true? What does it meanto “unlearn”? I had to find a pathway to that knowledge.I started the process of finding it with a simple question. It wentsomething like this: How does a point of view come to exist in conflictwith another and both are equally valid?What is it about each point of view that makes each valid in itsown right? What is the nature of either that puts it in conflict withthe other? This was the key question for me: How is this conflictresolved?Now I want you to bear in mind that these questions for me arenot philosophical. I was being entirely practical. I started to look atevery conflict I ever saw as an opportunity to ask these questions. Whatblew my mind was that this is really the state of everyone’s existenceat every moment of every day and most of them never realize this. Somepeople will think I’m completely off my rocker when I say this, but itreally is the truth. It can be this simple: If you are driving somewhereand someone is driving slower than you are, and it’s a one-lane road, thisconflicting relationship exists. You want to get where you are going fasterthan someone else wants to get where they are going. He wants thesame thing but differently than you do. How is this conflict resolved?Either he speeds up to validate your point of view, or you slow down tovalidate his point of view. Or something else completely.To draw in a little of “the markets” at this point, both of you wantthe same thing—a profit—but are approaching that from two points ofview. One of you is “long” and the other is “short.” Neither one of youwill get where you are going without this conflict finding a resolution.Maybe this “idiot” will get off the road. Maybe this “moron” will stoptailgating me. Do you see what I mean? Both points of view are equallyvalid for either person. Both points of view are seeking a resolution aslong as both points of view are held by either person. It doesn’t matter who resolves the conflict first. If the guy in front speeds up, he mustshare the other’s point of view. If the guy in back slows down, his pointof view must become like the guy in front. Both have a right to use theroad for his own purpose, but at that exact moment one or the othermust change his point of view or the end result will be an accident thatneither wants.Who’s first?
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The point I want you to see is that from that moment on my entirelife and everything in it became a study in how conflict develops andhow it is resolved. Suppose I go to a restaurant and the waiter is “tooslow”—from whose point of view? Suppose the waiter is “too fast”—again, from whose point of view? If I look at it from the waiter’s pointof view, what is that? Some lazy actor wannabe or someone who isoverworked? Someone who is late for a date or someone who desiresto give good service? How would I know unless I asked? The amazingthing, and if you aren’t careful you will miss the key to success withall this, is there would be no