Time trading.
Part 1.
This article completes a trilogy of articles (the first two articles, “Everything about the Myth of Market Correlations” and “On the Harm of Market Forecasts,” can be found here http://mfd.ru/forum/poster/?id=425) dedicated to what NOT to do think and act in the market, if you want to earn a stable income on it and in what direction you NEED to start thinking and acting in order to create your own style of stable earnings in the market. This article will primarily be devoted to HOW TO DO it and will largely consist of practical advice and recommendations for trading, which many readers asked me about after reading the first two articles.
Let me make a reservation right away: this is not the Grail or a panacea. There are not and cannot be trading systems on the market that will make money always and everywhere with 100% probability. Every system has its own black swan, but the key question is the probability of its occurrence and the ultimate cost to your account of its arrival.
Therefore, I cannot promise you that after reading this article you will immediately start making money at all times and in all cases of the market, but you have a very high chance of understanding how to start making money in 90% of cases in the market. And at a minimum, after reading this article, you will understand exactly how to stop LOSSING money with a 90% PROBABILITY. And I GUARANTEE you this understanding. And this is not enough, agree?)
So, let's go. First of all, I will briefly repeat the main thoughts outlined in the previous article in order to smoothly introduce into the topic those who have not read or have not retained the thoughts I previously formulated very well in their memory:
1. The market is chaos and cannot be predicted.
2. Traders certainly assume in their trading the future movement of the market, but this is not a forecast, but a fortune-telling in a 50/50 probability field. Therefore, if in his trading a trader makes a forecast the basis of the result, he most often loses.
3. The root of successful trading lies not in the ability to correctly predict the market, but in the sequence of correct actions of the trader both when the forecast comes true and when it fails.
4. This can be done due to the fact that although the exchange has many similarities with roulette and other gambling games (in particular, the probability of the market rising and falling from each point is 50%, which cannot be predicted just like the odds in roulette), but there are KEY and PRINCIPAL differences, which, when understood and used CORRECTLY, make it possible to turn stock trading into a stable source of income, unlike roulette, where this is impossible.
5. These differences are that on the stock exchange, each of your bets is not finite, but always extended in TIME, and at the same time, stock exchange fluctuations are always amplitude!
6. Therefore, on the stock exchange, even if you did not guess correctly with the forecast, you always have a chance to WAIT until you are right. That is, you can EXCHANGE the waiting time to receive the OUTCOME YOU NEED at the rate (based on the price movement in the desired direction).
7. Accordingly, you must arrange your ACTIONS on the stock exchange in such a way that your inevitable positive result is always only a function of TIME, and in no way a function of price movement (and, accordingly, does not depend on the accuracy of your forecast)! This is the KEY to successful trading.
8. As for the forecast, its function is secondary - an accurate forecast should only ACCELERATE the appearance of profit on the account (that is, influence only the TIME of achieving profit). But an inaccurate forecast should never lead to losses. It can only DELAY your profits.
As you can see, the word TIME is the key word in all these logical constructions and I constantly emphasize it. Therefore, it is no coincidence that I titled my principles of trading "TRADE IN TIME".
As for the theses themselves, I gave their detailed justification and evidence in the previous article; anyone who wants can read them again. The key thesis, of course, is the initial one, that the market is Chaos. As I learned (thanks to the readers) AFTER writing an article about forecasts, where I deduced and proved this thesis in three ways, it turns out that this same postulate was affirmed by at least two other well-known Western financiers before me. These are Bill Williams (author of the “Trading Chaos Theory” direction and Williams indicators) and Bruce Babcock (author of the book “Chaos Theory and Market Reality”). I was pleased to realize that I was not the only one who came to this conclusion in the market. And although my almost 20 years of experience in financial markets speaks for itself and always serves as a self-sufficient support for me in all my judgments about the market, it is nevertheless pleasant to be not alone in my views. By the way, we agree with Babcock and Williams ONLY in diagnosing market misconceptions about market predictability, but the three of us draw DIFFERENT conclusions and practical recommendations from this. And this also makes me happy, but for a different reason - I don’t want to be secondary)) However, I brought the authority of these two people to help precisely in order to force as many of my readers as possible, if not to be convinced that the market this is Chaos, then at least treat this postulate with as much respect as possible. AT LEAST - as a starting point for understanding my further reasoning. Even if you are not ready to agree with the idea that the market is unpredictable, then let’s at least ASSUME that this is so - and perhaps my further constructions and practical conclusions will seem valuable and interesting to you, REGARDLESS OF whether you believe that the market is Chaos or not . Shall we try?)
STOP LOSSES.
So, let's start practicing. The biggest problem in practice is when the accuracy or inaccuracy of the forecast is put at the forefront of the stock exchange result. And unfortunately, this happens everywhere. All exchange seminars, all market analytics are literally imbued with logic: if you guessed (correctly predicted) the direction of the market, you made money; if you didn’t guess, you took a stop loss, that is, you lost money. This is the answer to why most people who are consumers of stock seminars and stock analytics LOSE money in the market. And as you know, 90% of market participants lose money. So I'm telling you why this REALLY happens. Not because they have not yet learned to predict the market (the market is chaos and cannot be predicted). But because:
Traders turn their IMMENSE inability to predict the market by using STOP LOSS into REAL losses on their account.
Do you understand the mechanism? Have you ever wondered HOW exactly a loss is formed on our account?
Does an incorrect forecast cause a loss? NO. A forecast is just a guess about the future movement of the market, it is NOT ACTION on an account.
Does an incorrect entry into the market cause a loss? NO. An incorrect entry is just a situation when, immediately after you entered the market, it went in the wrong direction. This is not a loss yet, because the market moves chaotically and NO ONE is forcing you to close your account in the red.
A MINUS ON AN ACCOUNT IS FORMED BY ONLY ONE THING - your ACTION to take a STOP LOSS!
It turns out that STOP LOSS is the KEY moment, the watershed that separates profitable trading from unprofitable trading! After all, in order for your account to grow, you need to make profitable trades, no matter how trivial it may sound. What is a stop loss? This is making a NEGATIVE transaction, that is, an action that is exactly the opposite of growing your account!
In a strange irony, even in the very name “stop loss” there is a big mockery. According to direct transfer, this action should LIMIT your loss. And in fact, this is the ONLY action that FORMES your loss!
And indeed it is. After all, why in theory is a stop loss taken? Seminars teach that if the market goes against you, you must admit defeat and take the loss before it gets worse. Have you ever wondered whether this postulate is true? Does the fact that the market has moved against you by 1% or 2% (or wherever they usually teach you to take a loss) - does this AUTOMATICALLY mean that the market will move against you further by 3% and by 5% and by 10%? Really? Have you ever encountered a situation where as soon as you take a loss, the market takes it and, as if mockingly, immediately turns in the direction you originally wanted? Sound familiar? Do you know WHY this happens? Because the market is UNPREDICTABLE. And the probability of it going up or down from EVERY point is EQUALLY PROBABLE. And therefore, there is NO reason to take a stop loss based on the assumption that the market will DEFINITELY move further against you if you do not take this stop loss. Understand that YOU are ALREADY in the position. You ALWAYS have a 50% chance that the market will move in your direction. Therefore, all that is required of you is to WAIT for this moment and take PROFIT. And if you start cutting down moose when the market moves against you, then you CONSISTENTLY with your own hands, without ANY reason, will kill your ACCOUNT. Do you understand? WITHOUT ANY REASON!
Well, suppose you took your elk. What then? Then get into position AGAIN, right? (well, you won’t leave the market). And as soon as you take the position again, you AGAIN, from the point of view of the future movement of the market, will find yourself in the same situation of a 50% probable movement both IN YOUR direction and AGAINST you, in which you were at the time of taking the moose. With one exception “small” detail - you have already ALREADY reduced your score by the size of the moose. So was it worth doing?
I'll say even more:
ANY result in the market is formed by only ONE thing - the moment of EXITING a position. Not an entrance, but an EXIT!
Remember, this is VERY important for our further discussions. Both the plus and minus on the account are formed by ONLY ONE thing - the moment when you decide to CLOSE the trade. If you close the trade with a stop loss, you have formed a loss, if you close with a take profit, you have formed a plus. Everything else is not important, it does not affect the result.
I know people who constantly and a lot talk about the market, are always up to date with all the news, constantly make forecasts for the macroeconomy, thoroughly understand the financial kitchen and even - quite often make the CORRECT assumptions about the future movement of the market and, moreover, stand in the RIGHT direction. But they close most of their deals at a MINUS!
And in the same way, I know people who do not have an economic education, know practically nothing about the market, and often end up in the wrong direction at a very bad time. But they close most of their deals in PLUS. Almost nothing can shake them and force them to close in the red.
Why is this happening? Why don't knowledge and forecast determine stock market results? Because the result on the account is determined only by the ACTION to CLOSING the position. All the rest does not matter.
If you predicted the market incorrectly and it went against you, it DOESN’T MATTER. It’s not a loss unless you take it YOURSELF. And you DON’T NEED to take it!
TIME versus STOP LOSS.
Why not? Because the market is not roulette or betting! If you bet on red at roulette and it comes out black - ALL. This is the end. The bet is lost and nothing can be returned. If you bet on Zenit to win in the Tote, but Spartak won (St. Petersburg people, don’t break the monitor, this is just an example)) - the bet is lost and nothing can be corrected (just wait for the next game and bet NEW money). But if you bet on the market growth (bought a share), and it went down, NOTHING is lost. This is just a TEMPORARY reduction and you can turn the TIME factor to your advantage. And unlike roulette and betting, unlike all other gambling games - only on the stock exchange there is a TIME factor.
And only TIME gives us the opportunity to escape from the linear predetermination of our bet, determined by the forecast!
Accordingly, TIME gives us a CHOICE - take a STOP LOSS or take a TAKE PROFIT!
In other words, time gives us the opportunity to INFLUENCE the OUTCOME of the bet, even if the forecast did not come true right away!
If you do not use the time factor, if you automatically take a STOP LOSS in case of an incorrect forecast (if the market immediately goes against you) and do not even give it a chance after some time to go in the right direction - then you yourself, WITH YOUR OWN hands, TURN OFF THE TIME FACTOR and reduce the exchange to the level of ROULETTE!
But if you DO NOT SET STOPS, then you use TIME as the main ADVANTAGE of the exchange, as a result, you TURN OFF the similarity of the exchange with gambling and turn the exchange game into a consistent WORK to accumulate capital.
But how can you make sure you always work on the time factor without stop losses? Is this even possible? Does anyone work like this?
How NOT to take STOP LOSSES
Let me give you an example from life.I have a friend. He has been working as an asset manager in a bank for many years. Also manages client portfolios. He has consistently positive results and has led his bank remarkably well through 2008. There are several billion rubles under management.
Once we had such a conversation with him. I'm asking:
-How are you working?
-In terms of?
-Well, how do you enter a position, on what basis?
-Based on market forecast. If I think that a stock has growth potential over a certain time period, I buy it and wait for growth.
-Fine. And if it falls after purchase, what do you do?
-Nothing.
-What if it falls by 50%?
-It’s still nothing.
-So you don’t take a loss?
-What are you doing? Never. I NEVER record losses.
-What do you tell clients and bank management?
-And I tell all potential clients the same thing from the very beginning: I guarantee you that we will have a profit and it will certainly exceed the lower threshold of efficiency. But I just cannot guarantee you one thing - the exact TIME when this will happen. Yes, we will have temporary losses, this is normal. But the MOST terrible thing you will need to do in order to survive these losses is to simply WAIT.
-And they agree to this?
-Whoever doesn’t agree, I simply don’t work with them. Believe me, my results speak for themselves, I don’t run after clients. They are the ones “running after me” to offer money to management)
Answer yourself - why did you come to the stock exchange? Play? Or EARN?
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When and how did you earn your first million dollars?
The path to the first million was very difficult, by that time I had managed to go broke 2 times and come very close to this state several times. Moreover, the ruins were associated not with market crises, but with their own mistakes. And market crises just helped me; for my psychotype they are the most comfortable.
I laid the foundation for the starting capital for the future million precisely during the crisis, in the fall of 1998, by investing all my money (and the money of the company I managed) in Gazprom shares at a price of 5 cents. I sold it in 2001 for 10 times more expensive. But it was still far from a million. In 2002, I left the position of director of a stock company in order to fully concentrate on trading, freed from administrative work. My wife called me crazy, but I told her: don’t worry, by the age of 33 you will be the wife of a dollar millionaire. At that time, I only had an apartment, although a very good one, and $20 thousand in starting capital. And I was 28 years old, that is, I was going to increase my capital 50 times in 5 years.
At first everything was very bad, because a year later the YUKOS affair began, the market collapsed and lay at the bottom for almost 2 years. I suffered a lot at YUKOS, and I had to slowly eat away my capital. But it was an excellent time to improve one’s own trading skills, and in general for personal growth, as happens to us in any difficult time.
The trends ended, I began to come up with all sorts of non-directional trading systems, which eventually led me to training courses a few years later. But then I didn’t think about it, I was just trying to survive in a standing market. And still I waited. I was waiting for a new up-trend. And he waited.
At the end of 2005, a boom began. The state turned its face to the stock market. The reform of RAO UES has begun, preparations for the IPO of Sberbank, and the IPO of Rosneft have begun. Big money came to the market, and we got the second phase of the up-trend, the first was back in 1999-2002. At this phase, primarily thanks to the reform of RAO UES, I earned my million dollars. This happened at the turn of 2006-2007, just at the age of 33 I completed my task.
The advertisement replicates the image of a successful trader trading for a couple of hours a day, and only from a laptop, on the beach under a palm tree. You live in Kaliningrad and, as I understand it, you work quite a lot. What's the matter? Do you just don't like hot climates?
In fact, advertising images of traders, like many other characters in other professions, are very far from reality. Although there are some coincidences. I travel quite a lot; I go with my family to different countries at least 3 times a year. I take my laptop with me and sometimes trade from the beach or from the top of a mountain or from the deck of a transatlantic cruise ship, crossing the equator (this is not a figure of speech, there was just such a case once). But I work at home most of the time and spend up to 18 hours a day at work.
The fact is that I am far from the classic example of a private trader: I have about 80 clients from eight countries whom I advise on managing their capital. We don’t yet have direct licensing of private managers, so we have to use similar schemes to keep everything legal. Therefore the load is very large.
Many of those who have been in this business for many years do not understand at all how they can manage 80 accounts at once. But, firstly, now I already have assistants from among my former students who showed good results. Some of the accounts are managed by them. Secondly, in the last 2 years I began to use robots, but not to make trading decisions, but simply to automate operations.
Of course, being just a private trader managing your own capital, you can trade more relaxed, including from the beach. But I have more serious ambitions. Now I am on the way to creating two hedge funds: one in Russian jurisdiction and one in foreign jurisdiction, in the Cayman Islands.
In general, I am a teacher secondarily, and a trader and manager first. My trick is precisely that I am a player-coach, and not some kind of teacher who has done a little trading and studied the theory. And I teach practical things, including showing a lot of real online trading publicly in different formats, which almost none of my fellow teachers do.
There is an opinion among stock market players that those who cannot trade profitably go to teach. What is your motivation as a teacher? Income from tuition or something else?
About ten years ago I thought exactly the same: those who don’t know how to teach, those who know how to do it silently. But about five years ago, two serious shifts in worldview occurred. Firstly, this is due to age: I was approaching the age of 40, and the motivation in the form of increasing the amount of money I earned no longer suited me. Private traders working from home really lack socialization. We interact with the market, and it is a soulless object, although thousands of people make transactions on it. But it is precisely because of the large number of people that their actions together represent the chaos with which each of us communicates. As a result, we compete only with ourselves, challenging only ourselves. This, on the one hand, is good, but on the other, it’s hard, because you don’t communicate with anyone, you don’t create anything, you just make new money out of money. You have no clientele, no partners, no employees, no visible results of your work other than a growing account. This problem sits very deep in the brain of every private trader who has been in the market for 10 years or more.
On the other hand, I have always envied with white envy people involved in science and art. They create something that didn't exist before. They make discoveries and create works of art. I watched a lot of interviews with these people and regretted that I didn’t have any gift that allowed me to create. As a way to join other people's talents, I even took the path of helping creative people with my money. He helped publish a book for a philosopher and, having reached a higher material level, was going to sponsor music and films.
But then, as often happens, chance changed everything. In 2013, I was asked to write an article for a trading article competition. The fact is that for many years I was one of the top authors of the online forum where traders communicated. There were always some arguments and dialogues going on there, and my remarks evoked a lot of responses. The leaders of this forum knew that I could formulate thoughts quite well, so they offered to write an article. She received one of the awards, and I was invited to Moscow for the award ceremony. There, on the sidelines before the ceremony in the Moscow Exchange building, I was recognized by several people with whom we traded and communicated back in the 90s and early 2000s. In fact, I was excluded from this crowd for 12 years, and over the years two generations of new traders and managers appeared in it, of which I knew none except the old guard. The organizers of the ceremony immediately reacted to this fact - on the one hand, a new face in the modern market crowd, on the other, a person with experience and recognizable by veterans, they found it interesting, and in the end they invited me to participate in the discussion at the round table of managers instead of the one who did not come manager of the Moscow Exchange. That day at the ceremony there were two round tables, at which more than 10 speakers spoke, but only two speeches received applause from the audience, and both were mine, because they sharply and unexpectedly did not coincide with what representatives of the brokerage industry were saying and are saying, but at the same time, they hit exactly what many ordinary market participants feel.
Since this all started. Then I was asked to participate in another competition, for which I had to write three more articles. A series of articles appeared in which I formulated a coherent system of views, they interviewed me several times and offered to conduct training webinars for traders.
If we return to the question of motivation, then first I found out that I am good at writing, that is, creating something close to objects of art, because literature is one of the arts (I even made a timid attempt to start a small memoir in the form of two articles about the first years of his trading, which received a lot of positive feedback from readers). Then, in response to the articles, I began to receive many letters from people who, thanks to my thoughts, began to trade on the stock exchange more consciously, reduced losses and began to make money. Further, when I began to communicate with people in the form of webinars and seminars, many began to say that I have charisma and the ability to explain complex things in an accessible way. So I realized that I could teach other people trading, it was as if I had a second wind in the profession, a new path that not only did not negate everything I had gone through before, but gave my trading experience a new, more important meaning - to help other people... And I began to actively socialize in this direction.
What type of activity brings you your main income - trading with your own money, managing other people's capital, or teaching?
Until now, seventy percent of my time that I spend on what I call show business - performances, articles, training - I spend for free. I do the remaining 30% for a fee, and according to indirect evidence (in the field of teaching trading and investing it is not yet customary to openly talk about income) I am one of the highest paid stock trading teachers in the country. But as a market manager I earn much more. I have several million dollars under direct control and much more under indirect control. I advise on the issue of hedging currency risks of capital owners (including legal entities and banks) amounting to billions of rubles. As a result, in general, income from teaching is no more than 10-15% of my total income, which is why I can afford to do many things in teaching for free. And also, being financially independent from income from teaching, I can give truly truthful content, since I don’t have to adapt to brokers, many of whom, when inviting me to speak, ask me not to say something unpleasant for them. I say everything that I consider necessary, otherwise I simply do not agree to speak.
What kind of knowledge and skills does it make sense to give to beginners and what do most teachers give?
The key point that needs to be talked about a lot is the issue of risk. The market is working with risk and your own reactions to it, and not something else (not mathematics, not predictions, not knowledge of economics, etc.) Most courses, especially free ones, focus on the topic of making money. This is why we need advertising images of traders on beaches and on their own yachts, who can correctly predict market movements and earn huge money. I’m telling you that it’s impossible to predict price movements; the market is chaos. In some cases, some market participants make correct predictions, but these people can be compared to champions of sports competitions. Most people who play sports never become champions.
If a person wants to become a champion, he must take on increased loads, train for a long time, and even this does not guarantee him victory in competitions. Meanwhile, millions of people who come to gyms do not set themselves the goal of becoming champions. If a beginner, coming to the gym, declares that he wants to be like Arnold Schwarzenegger and demands to be given a 250 kg barbell, they can give it to him. But she will push through his chest, and that’s where it all ends.
In courses where traders are taught to earn thousands of percent per annum, they make the same mistake - they give an increased workload that ordinary people cannot do. It is advised to take leverage and try to predict market behavior. Therefore, even on the stock exchange, according to recently published statistics from the Bank of Russia, more than 90% of traders lose capital within 9 months. The Central Bank kept silent about the Forex market, where the leverage is much larger and not all companies allow you to withdraw earned profits; there the percentage of losers is close to 100. But this statistics caused a flurry of criticism from brokers, while I have been talking about the same thing in my classes recently 3 years. One can argue whether 90% of traders lose money or 80%, in 9 months or 15, but these figures do not fundamentally change the picture.
I orient students towards something else. I tell them that only a few can become champions, and if you have the makings, then you can strive for this, but at first you need to set normal goals for yourself. I call this health investing - by analogy with physical education. A normal goal is to earn two or three rates on bank deposits in a year, that is, 20-30% per annum, if we consider the average deposit rate to be 10%. Money on the stock exchange does not have to be large, you can start with 10 thousand rubles, but it must be long. But the most important thing is that to achieve these goals you do not need either leverage or the ability to forecast markets.
If you set realistic goals, the exchange may well become a source of additional income. Many teachers encourage people to perceive the stock exchange as the main source of income. A common phrase: “We will teach you to trade in order to “live from the stock exchange.” I am categorically against this. Because the stock exchange as the main source of income is the lot of the few, the marginalized, to which I consider myself. It is always instability, risks, losses, etc. at the learning stage, and then. But as a second source of income, the exchange is ideal. In terms of all the indicators, it is much better than alternative investments, for example, real estate, antiques, precious metals or venture funds. I have investment experience in all these areas, so I understand well. what am I talking about?
When people object to me that 30% per annum is very little, I ask: not enough for anyone? Most people, if you ask them on the street, will say that this is a lot, because banks give significantly less on deposits. If 30% is not enough, then why do banks give out money at 12-15% in our country and at 2-5% in the West? If 30% is not enough, then why does Warren Buffett, who is considered a genius investor, which even trading teachers will not argue with, earns at best 30% per year?
There are many free offers on the trading education market. Forex companies are the most active in this direction, but a number of brokers working on the Moscow Exchange also offer their free courses. How do you explain the demand for paid training?
Where do free courses from Forex companies come from? Most of them are so-called kitchens, where the broker is the client’s counterparty during his trading, does not take his transactions anywhere, locking them in on himself. That is, your profit as a client is the loss of the Forex company and vice versa. This is the main problem. It does not exist on the classic exchange market. There, the broker is just an intermediary, and you trade with an impersonal mass of the same traders. Both the exchange and the broker are not interested in you losing money. They are interested in you trading as long and as actively as possible and paying them a commission.
The task of the kitchen is to bring you to it as if for service. Its employees know for sure that you will lose money, because your money is their earnings. As soon as you brought them money, you lost this money, and the forex kitchen acquired it, since your loss is inevitable. Therefore, they can afford to attract clients not only with free training. They have referral offers: if you refer a friend, we will give you part of their deposit. The quality of training is appropriate: continuous motivation with high profitability like a carrot in a donkey’s face, imposition of leverage that multiplies the speed and probability of loss, etc.
As for brokers on the stock exchange, everything happens somewhat differently there, since there is no direct dependence of the broker’s earnings on the client’s loss. But it is indirectly present, because the broker makes money on commissions and leverage, lending money and securities to some clients to others. Basically - just on the shoulders. I know this from the inside, having run a brokerage company myself. That is, it is beneficial for the broker that the client takes the lead, and this leads to ruin. Thus, by promoting the use of leverage in free courses, the broker indirectly pushes the client to lose.
Judging by my audience, paid courses are attended mainly by people who have a constant source of income outside the exchange. They are quite adequate, they understand that, firstly, free cheese can only be found in a mousetrap, and secondly, that it is easier to pay for being told in advance a bunch of useful details about the stock exchange and its pitfalls than to find out them yourself, losing yours money and time. In addition, I, like other teachers, tell many things for free, and people come to us for paid training, having already become acquainted with some of our thoughts on the Internet and deciding that they are interested in receiving more in-depth information from us, they trust us.
In one of your publicly managed accounts, you showed returns of almost 600,000%. This fact certainly has a positive impact on your image in the eyes of students and clients. But what do you say to those of them who want you to earn thousands of interest for them or teach them how to do it?
I have commented on this bill several times, and there are these videos on the Internet. That profitability was made on the website comon.ru, where anyone can connect their account to show everyone their profitability. But there is one nuance in this system: it does not take into account deposits of money into and withdrawal from the account. In fact, the profitability was reflected correctly at first, until I started withdrawing money from the account. Approximately the first 600%. Moreover, people could see not only my transactions after the fact. I wrote in advance what I was going to do. The article was called “Time to Buy”, it was published in March 2014, when quotes collapsed due to the fact that everyone was afraid that Russia would start a war with Ukraine. I myself bought options, and purchased options, if the forecast is correct, give a very high profitability.
The opportunity to make a confident forecast arises very rarely in the market; I call such moments the points of probability shift. But then there was just such a case, so the first 600% were done absolutely honestly and publicly. There was a lot of hype about this, I was interviewed, and several Internet conferences were held. But you need to understand that I showed such profitability at 100% risk: if the forecast had not come true, I would have lost all the money in this account. I categorically do not recommend repeating this to beginners.
Then I began to withdraw money from this account, and the next profit went to the remaining funds. That is, if I earned 600%, then reduced the account to the original size and earned another 500%, in fact I received 1100%, but the program will multiply the profitability and calculate 3000%. So in reality, that account has grown by about 19 times over the entire time, and not 6 thousand. And 600,000% are explained by the nuances of displaying information.
If you risk your entire account on every trade, you will never capitalize the interest. This is stupid because on the next trade you could lose 100%. Risking your entire account, you must constantly withdraw profits from it. This is just one of the risk management systems.
To clients who ask me to earn them this kind of return on their money, I tell them it is impossible. Or I suggest waiting for a new point of probability shift and taking 100% risk. Most of them say they are not ready to lose all their money.
Of my 80 clients, there are only two who said they were ready, and their bills could theoretically increase many times too.
Among your courses there are those aimed at both investors and speculators. How do you assess their chances of success in increasing their capital?
Among my clients, of course, less than 90% lose, because I first of all teach them not to do what everyone else does: use stop orders and leverage, make forecasts and trust other people’s forecasts, etc. Losses are inevitable when trading with high risks in anticipation of very high returns.
I teach strategies with moderate closed risks. If there are losses in them, they are limited, and not due to stop losses, but due to the use of options, because most of my strategies are option ones. If we are talking about strategies on the linear market, the stock market, then there is also a set of rules that do not allow you to take a lot of risks.
I do not strictly monitor winners and losers, especially since not everyone is ready to talk about trading results, but based on the results of communication on Skype - and I communicate with each group within 2 months after training, this is the so-called post-service period - I receive certain information. Probably the ratio is close to 50/50. Not better. Because the market is a very competitive environment, and even with all the information about proper trading, not everyone is able to apply it. Not everyone has a psychotype suitable for the stock market, and not everyone has the discipline. It is impossible to teach everyone how to make money on the stock exchange, this is a utopia. But if you manage to change the percentage of losers from 90 to 50, this is already a very significant result.
The profitability of the winners is also not crazy, the majority reach 2-3 deposit rates. The returns on options are higher, up to 80%, but the share of winners is approximately the same.
As far as I know, you did not start trading options from the very beginning of your career on the stock exchange. But now they have become one of the most famous popularizers of this financial instrument. What are the advantages and disadvantages of options?
Indeed, I came to options around 2008-2009, after 15 years of trading linear instruments: currencies, stocks, futures. And, despite all my previous experience, options literally blew my mind with their capabilities. Compared to linear markets, this is a multidimensional world. On the one hand, you can make money in options in the same way as in linear markets, on growth or decline, but with closed risks and potentially unlimited returns. But their capabilities are much wider. They allow you to create structures, such as a purchased straddle, that make money on the rise and fall simultaneously, which is impossible to achieve in linear markets. There are also options positions that make a profit when prices move within a certain range, without strong trends. This, by the way, has been in great demand in recent months, when the RTS index, in fact, is going nowhere and in general during periods of horizontal trends, which on average always prevail in all markets.
I typically compare trading futures and other linear instruments to using a rotary landline phone. A telephone is convenient, but why limit yourself to a rotary telephone if there are push-button and mobile phones? This is silly. You need to be some kind of special conservative or someone with cockroaches in your head. Likewise, it would be foolish not to use options because they enhance a trader's options. There is no reason to give them up if you are already trading linear markets.
Options have only one drawback: huge opportunities also come with huge risks. And in order to deal with options, it is imperative to understand their features and differences from linear markets. There are many hidden risks that beginners simply do not realize, even with many years of experience in linear markets, transferring their experience to options too literally. This is very dangerous, and at one time I myself experienced these problems to the fullest, from which I now protect my students.
Many people say that options traders are some kind of closed caste and that you need to be good at math to trade them. I would strongly argue that yes, options are more complex than stocks, but they are not as complex as they say. After all, you don't need to know exactly what parts they're made of to drive a car or use a computer. I teach how to “ride” options and in my teaching I avoid unnecessary complications, mathematics and formulas. Therefore, among my students there are even ladies philologists who are difficult to suspect of a mathematical mindset.
In stock trading, as in real business, few achieve success. What personal qualities are necessary for successful trading on the stock exchange? Are they the same as in business, or different?
We first need to clarify what we mean by success - a champion result or a return higher than the deposit? In order to earn 20-30% per annum and 100% per month, you need different qualities. For the first, the same qualities that are needed in real business are suitable: you need to treat trade as a profession and pay a lot of attention to it. Many people treat the stock exchange like a game: they open a trade, wait a little. Then they recorded either a profit or a loss. Someone studies economic indicators and makes, as it seems to him, reasonable forecasts. Others dive into the math, trying to figure out where prices will go. These are all the wrong ways. A certain perseverance and a systematic approach are, of course, needed. There are certain similarities with business here. But the difference is what exactly you need to work on.
Most people think that there is a certain logic to stock price movements, just like in real business. That you can derive a formula for success, the proverbial Grail, and then simply use it. These are all pleasant illusions.
In fact, a trader’s success lies not in the ability to predict the market, but in the ability to act correctly in any market movement. Thus, market movements become unimportant. And time and effort should be spent not on studying the market, but on studying yourself in the market.
Two people could buy the same stock at the same price, but one would sell it for a profit and the other would sell it for a loss. Because one will wait out the phase when the stock makes a loss, wait for the profit and close the deal on time. And the other will either be afraid of an even greater loss and sell the share cheaper than he bought it, or will not take the profit on time and will sit in the share until the moment when it falls in price again. The market was the same for them, but the outcome was different. Why? Because they acted differently, and this happened because they interacted differently with their emotions, with fear and greed. This is the key.
So stress resistance and patience are of great importance for a trader. The entire time you are in loss, you experience very difficult emotions. A trader's job is to deal with these psychological issues. And the vast majority of people try to get out of the zone of psychological discomfort, for example, take a stop loss as quickly as possible, that is, capitulate. These are not fighters. And they inevitably lose.
As capital increases and the desire for higher returns increases, fighting skills become more important, and the number of people who are able to demonstrate them becomes less and less. Only a few in a million become champions.
I have had very unpleasant situations in my life, I went broke very seriously 3 times, I went not only to zero, but even to minus. Every successful trader has enough stories like this if he has been on the market long enough. And when you find yourself in situations where there is no money or large debts, God forbid, when you have to think about what to feed your children - and I have three of them - in order to get out of there, you need great stress resistance. After the exchange, such situations seemed like a cakewalk to me. Once, when I lost a personal 2 million euros within a month, they asked me: how did you stand it? Someone said that he would jump from the balcony if this happened to him. And these were people who went through the 90s and saw everything. I answered: I am a trader with twenty years of experience, is this a problem? It's just a new challenge, a new chance to see what you're worth. You stand on the pound-yen pair with a hundredth leverage or sell the straddle at the central strike the day before expiration - then you will understand what the problem is.
In other words, when you are used to working every day with the risk of completely losing track, while being fully aware of the consequences, when a crisis for you is the norm and a way of life, then you have enormous advantages compared to ordinary people. You acquire stress resistance skills that protect you like armor in any life crisis situations. Moreover, you even begin to experience a thrill from stress, from struggle. For me personally, life without struggle is generally boring and meaningless. But you can’t relax, you need constant control, considering the consequences of each of your, and not only your, decisions several steps ahead becomes the norm... So, when they tell me the phrase “Ilya, this is risky,” I always answer simply: risk - this is my profession.
In general, I am constantly learning to work with my psyche in a stressful situation, and most people spend time studying the market without studying themselves.
To those who dive too deep into mathematics, looking for market inefficiencies, I ask: how many Ph.D.s in mathematics or physics do you know who got rich on the stock market? There are almost no such people. On the other hand, I know people whose education is approximately equal to two classes at a parochial school, but they earn money constantly on the stock exchange. They have zero knowledge of macroeconomics, they do not understand business, but they make a profit on the stock exchange because they have a ram psychotype. So he got into a deal, and until he comes out of it with a plus, nothing can get him out of it. Highbrow mathematicians, when they see that the situation does not correspond to their model, immediately capitulate. The Ram never capitulates. I know people who bought Gazprom shares for $2 in the fall of 1997. After a year they were worth 4 cents, but they waited 9 years and ended up earning 90% interest from the date of purchase for each year they waited. In order to endure a 50-fold drop in stock price, you need to have a very special psychotype. You have to not give up when a stock falls, but the hardest thing is not to give up when it starts to rise and you watch how your losses have been cut in half, then three times, then it's hard not to give up your money when there is no longer a loss. The absolute majority, 99%, will leave the deal after first saying goodbye to their money, and then, after 3 years, seeing that the market is ready to return everything to them. You need to be a very stubborn ram to stay in the stock further and end up with a multiple increase in capital from the initial amount. The ability to achieve your goals and not give up under any circumstances are very important qualities on the stock exchange. Key.
In addition to business, stock trading is often compared to a game and a sport. In your opinion, what are the similarities between trading and sports and gaming, and what are the differences?
We have already talked about sports, but as for the game, I often use roulette as an example. There, in certain cases, when you bet on red/black or even/odd, the chances of winning and losing are 50/50. In the market, too, at each specific point, prices are in equilibrium and the chances of a small movement, say 1%, from each point are approximately equal, even if before that the price soared very high or fell very low. But in roulette, sweepstakes and similar games, you bet once and then see whether you guessed correctly or not. And on the stock exchange it is possible to extend the bet: by buying a share, you can sit out the loss and wait for a profit. Imagine that in a casino you could, having bet on red and not guessing the color, say: let’s wait, what if the field turns red? It would be a completely different game. It’s precisely on the stock exchange that you have this opportunity to wait, and when you use it, you get a colossal advantage compared to a roulette player. It is a pity that the vast majority of stock exchange players - fans of stop losses - do not use this opportunity, automatically equating their trading to roulette.
Another similarity between roulette and the stock exchange is the so-called “negative sum game”. Because even when playing for equal odds (red/black, even/odd), there is a “zero” field in roulette, and when the ball hits there, both those who bet on red and those who bet on black lose. Only those who bet on zero win. The probability of such an outcome is approximately 2.5%. This is the average amount that players who play on red and black pay to the infrastructure, that is, the casino, for the right to play. On the stock exchange, the infrastructure also charges both sides - the winners and the losers. The role of zero is performed by exchange and broker fees. Therefore, if we did not have the opportunity to wait for the desired result, we would all lose money in the same way as sooner or later those who constantly play in a casino lose, simply by the law of playing with a negative sum.
It remains to compare stock trading with art. The famous musician Fyodor Chistyakov said in a recent interview that it no longer makes sense for him to listen to other people's music, he has already listened to everything he needs. Now his task is to generate his own musical wave, and other people's music puts him on his wave. This echoes the thought of Vladimir Vysotsky, who sang about someone else’s rut. Is it possible to learn to trade profitably using someone else’s methods or do you need to look for your own way, and once you find it, don’t listen to anyone?
I myself did not listen to anyone (and in my time there was no one to listen to) and created my own trading methods. This ultimately led to success, but through three severe personal crises. Therefore, I would not recommend my path to anyone. Now I don’t teach people to mindlessly copy me, I just point them in the direction and warn them against the wrong paths.
My goal is not to give people the only possible way to make money on the stock market. I'm just saving them time that they would have wasted on the wrong path. Then they can look for their own paths, but in the right direction.
Many artists began by imitation. For example, the group "Time Machine" imitated The Beatles at the beginning, and "Aria" imitated Iron Maiden for a very long time. But then they came out with their own music, although in a similar style.
There are also many parallels between art and stock trading. Those who listen to my free courses only receive a genre in which they can compose their music. Those who undergo deeper training may already repeat what I do, but then still add their own elements.
I often draw analogies between trading, sports and art, because all these activities have a lot in common. Few become champions, brilliant creators, or outstanding traders. But at the same time, the absolute majority can engage in both sports and art (for example, running or drawing), without becoming either geniuses or champions, performing their normal, non-champion tasks. Therefore, it is not at all necessary to become champions by playing sports, art or trading.
And most importantly, there is one more negative feature in championship and genius: all this does not last forever. Sooner or later, a new generation inevitably comes and pushes the former stars off their pedestal. These examples can be found everywhere. The great director Francis Ford Coppola, already in adulthood, admitted in an interview that he would never be able to make something like the films he made in his youth. This is an unattainable peak for him, because the young energy is gone, the talent is gone. Our Eldar Ryazanov had a similar situation.
In China, as Coppola said, famous poets in the heyday of literature, feeling that they had reached the peak of their skill, turned to calligraphy. They changed their occupation to a similar, but different one, because they understood that each subsequent poem would be worse than the previous ones. They did not want to disgrace themselves and chose another art where they could progress.
In trading, I personally know people who, having 15 years of experience, 10 of them with stable earnings, then lost all their money in 3 days. But these are champion-level people who constantly work at maximum risk. You can’t relax there, like in the boxing ring, where champion titles have never protected anyone from a blow to the head. An experienced champion can win for a time against younger opponents who have better reflexes and more energy, but will eventually lose to one of them. Therefore, when working with client accounts, I have long and deliberately avoided maximum risks. But on my small accounts, like the one I show on comon.ru, sometimes I take the maximum risk in order, on the one hand, to maintain shape, and on the other, to show the possibilities of options and my capabilities.
It is no secret that students often look in the teacher’s words not only for knowledge on a specific subject, but also about life in general. Do you have your own philosophy that you pass on to your students along with your knowledge of stock trading? If yes, tell us its main postulates.
Indeed, any training, no matter what you teach - macrame, karate or stock trading - is always a little more than training in a specific business. People begin to trust you and ask for advice on other topics. I answer these questions when I can. To sum up what I'm trying to convey beyond stock trading is the principle that you need to be a fighter in life, not just on the stock market. You need to rely only on yourself, not expect help from anyone and not envy your neighbor.
There is a lot of political controversy now; society has split into two camps - relatively speaking, liberals and patriots, not only in Crimea and the East of Ukraine, but also on issues of corruption, freedom of citizens, etc. Patriots say that we have a wonderful country, we have more freedoms than in the West, etc. One can argue with this point of view, but it is still much better than the liberal one, because this point of view is positive. Liberals say that we have a terrible state, where everything is against people, where the rich get richer and the poor get poorer, and we must either get out of here or make a revolution. In my understanding, these are not liberals. A liberal is a person who knows that everything depends on him. He is for freedom not in terms of permissiveness, but in terms of responsibility for one’s destiny. And here liberals are people who criticize the authorities. They thereby show that they depend on the authorities.
Chulpan Khamatova, in my opinion, is a real liberal. She does not criticize the authorities, believing that everything is bad with saving dying children, but collects money for her fund and really helps them. And when such people reach a certain scale of their activity, the state itself comes to them and begins to help. But even if help doesn’t come, they will still do their job because they think it’s necessary.
I am one of the people who say: if you want everything to be good in the country, start with yourself. Don’t stir up hysteria about how much Sechin earns, for example, or how much the bridge to Crimea costs. If you don't want corruption in the country, don't give bribes. Don’t rely on retirement, then you won’t care whether the retirement age is raised or not. There is you and there is the space around you. And it depends only on your actions what the space around you will be like. How will your family live? You can’t change the whole world, but changing your life and the lives of your loved ones for the better is necessary and possible. If everyone does this, then the country as a whole will change. Many will say that luck or starting capital is important. No, they are not important. I myself come from a poor family of pediatric doctors from the distant island of Sakhalin. I started from scratch. And I never asked anyone for help. Absolutely each of us has the opportunity to achieve more in our lives, regardless of what our neighbors or authorities do.
This worldview is actually very closely connected with the stock exchange, because the stock exchange is one of the few areas of human activity where there is no one to expect help from. There is only you, and in front of you is the market. And whatever you do, this is the result you will get.
Attempts to seek help in predictions or technical analysis indicators do not lead to success; all predictors are charlatans. If you are ready to fight your fears and greed, you have a chance to make money on the stock exchange. I am often asked how I withstood situations when I was bankrupt, what motivated me. I answer: when you realize that no one will correct the situation except you, unnecessary reflection goes away. I don’t understand people who sit in low-paid jobs for years, criticize everyone and expect the state to remember them and help them. You can wait like this all your life, or you can get up from your chair and find something else to do, find the path that will lead you to success. Don't criticize and complain, but do it. The only way.
About the person
Ilya Korovin
Born in 1974 in Ivanovo, grew up in Yuzhno-Sakhalinsk.
From 1991 to 1996 he studied at the Moscow State University of Commerce at the Faculty of International Economic Relations.
Since 1993, he has been trading on Russian stock exchanges and Forex.
In 1997 he moved to Kaliningrad, where in the spring of 1998 he joined the Kaliningrad Stock House company. In a few months, he went from manager to director of the company.
Since 2002 - private trustee, consultant on stock trading and capital management.
Since 2013 - popularizer of trading and options trading, teacher at the Moscow Exchange Derivatives Market School.
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Review of I. Korovin’s course “Hidden Intraday” is definitely a difficult job, since this trader is without a doubt very titled and has a huge amount of knowledge that is not comparable to my luggage in the field of exchange trading, especially since Ilya Korovin is considered one of the best options traders in Russia, I myself have never traded options and have only theoretical ideas about them.
However, this will not prevent me from making an objective review of Ilya’s course and after reading it, you will understand why this is so!
Let me remind you that a complete list of reviews and testimonials can be found here:
As usual, I will first present the composition of the course. It consists of 5 webinars, which are included + various additional materials:
Each webinar lasts more than 2.5 hours, so the total amount of material is more than 15 hours. Of course, I didn’t watch it “from start to finish,” I watched a total of about 6-7 hours from all 5 webinars.
The price of this material: 58,000 rubles, the price is high and is clearly designed for people who are going to open an account with more than 10,000 rubles.
In this situation, I will not do a detailed review of the webinar; I will just try to highlight the key, important points that caught my eye, first of all, these are those points that relate to the “training components” of the course.
The basis of the course is learning how to use a straddle in trading. A straddle is an option structure that, under certain circumstances, allows you to make money on any market movements, i.e. both in growth and in decline! And here the first disadvantages of this video course begin, for those who purchase this course today in 2015-2017!
In order to understand a little how this works, I ask you to read the article about options if you do not know what they are:
A classic straddle involves the simultaneous purchase of a call option and a put option, it turns out that we pay a conditional $10 for options, in the hope that one of the options will bring us more than $10 (if the price goes up, then the call option, if down, then the option put) Approximate diagram:
I think from this picture you understand that if the price does not go up or down, we will not earn anything!
In his course, Ilya talks about a synthetic straddle made from options and futures, but this does not change the essence. This is precisely the rub, that the Russian market has become very little mobile, and all such strategies no longer bring the same profits and do not provide the same opportunities that they provided in the past! Look at the chart of the RTS index, which is given as an example in this course :
Starting from 2012, which is marked with a red line, the price moves very “weakly”; volatility has dropped significantly, and if you look at the end of 2016, the price completely froze for 4 months and stood in a very narrow range. However, of course, no one is stopping us from using other markets, but still it is the RTS that we are talking about in the course.
Now I would like to evaluate the course itself in terms of “learning ability”:
- Ilya Korovin has an unusual amount of water in his course, i.e. above text slides, without any meaningful explanations or visual background, just words. For example, 22 minutes about your course and its advantages, and all this with one slide, where there is nothing essential, only words. Why do people need this? They have already bought your course, tell the essence, and the benefits need to be told before purchasing!
In general, this applies to many moments of the course, where Ilya is extremely uninformative! The entire first webinar as a whole is a lot of water and introduction to the essence, without any specific actions. - The second significant disadvantage of the entire course is the extreme lack of illustrations! There are very very few of them! This is especially true for the second part of the “covered intraday”. The trick of the strategy is that we create a straddle and then start trading intraday futures (classic trading that everyone understands without exchange options). In this part of the course, there are almost no pictures at all, a text description is given:
Personally, I can’t understand how you can teach trading without showing charts, but it turns out you can quickly throw together a presentation and sell it for 58,000 rubles. - Very often during the course, Ilya tells some things that are extremely difficult to understand at all, because he does not back them up with a schedule or any presentation. For example, in this screenshot, Ilya says:
“In this case, we can turn the straddle into a butterfly, a closed butterfly, where we initially limit our profits and losses.” On the one hand, Ilya Korovin did not tell us anything complicated, but if a person poorly understands the topic, then he will not understand anything at all! Because only a person who is at approximately the same level as the listener can perceive such information by ear! Ilya, like many professionals in his field, sometimes forgets when communicating that those things that seem obvious and simple to him are not at all obvious to unprepared listeners. - From the third webinar in the course, the practical part begins, in which Ilya explains the specifics of his strategy and shows what exactly needs to be done! However, due to the rather “difficult to understand theory without pictures” in the first part of the course, it is very difficult to properly connect these parts with each other! After watching the third seminar, I had a feeling of misunderstanding, the same as after the first, although in Ilya’s voice there was always a powerful confidence in what he was saying, but this confidence was somehow not transmitted to me, precisely because of this weak connection and small informative text without pictures! After this, the QUIK terminal is a little scary:
Total: if you try to express an opinion about the closed intraday course, you will get something like the following, there is no doubt that Ilya Korovin knows what he is talking about, he is well versed in options and all their thetas, gammas and other components that have an important role in trading them. However, Ilya is not good enough at presenting the material to people; the lectures are uninformative and very poorly illustrated, which is simply mandatory and necessary in trading. I very poorly understood the connection between the main idea of a straddle and intraday, I could not understand what the advantage of using a straddle together with intraday is, that is, the profit does not increase or decrease in any way, in other words, if you trade poorly intraday, then the straddle will will not help. If you make a “crooked” straddle, then intraday will not help you either. It turns out that in fact Ilya is telling two separate and independent things that seem to be connected, but if they are separated from each other nothing will change.
To sum it up in the form of an assessment, then given the price of 58,000 rubles for this course as of January 2017, I would not advise anyone to take this course, it is not worth the money. This course reminded me a lot, in which there are a lot of smart words and interesting conclusions, but no practicality!
A professional trader without fear and stop losses, but with options. Scalper, intraday trader, “time trader”. On a public account, a showman: he makes turns and risks all his capital, despite the loss on March 3, at the end of 2014 he achieved a profitability of thousands of percent). The rest of his personal and client accounts are traded much more carefully - which he strongly recommends to his students, guiding them towards a realistic return of 2-3 bank deposit rates.
Professional trader. He claims that out of the last 20+ years, only 4 years he worked for salary and bonuses (1998-2002 - asset manager and later head of an investment company within the structure of OJSC Gazprom in Kaliningrad). At the fall of 1998, he increased the investment portfolio of IC several times due to short sales, and having headed the company, he turned it into the first broker-dealer company in Kaliningrad with a license from the Federal Securities Commission, membership in NAUFOR and the first forex broker in Kaliningrad based on a regional bank .
In the financial market I went through trading in vouchers and state bonds, forex, and scalping on MICEX shares. After 2008, Russian options and futures FORTS (Moscow Exchange Derivatives Market) became the main trading instrument. A striking feature of the trading style is trading without stop orders. Applies options strategies such as selling volatility, straddles and strangles, proportional environments and the author’s “covered intraday” strategy, which combines option construction and scalping with futures.
He teaches a lot and well, enjoying the process. A lot is published. Topics: investments in the securities market and the foreign exchange market, stock exchange business for economics students, webinars on the author’s options and futures strategy “Hidden Intraday” and on “Time Trading”, seminars on options trading.
