Don Miller l Br Slides

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Surviving & Thriving in 2011:Surviving & Thriving in 2011:Managing Your Plan AND Yourself for Managing Your Plan AND Yourself for

Sustainable SuccessSustainable Success

Don MillerDon Miller

Wednesday December 29, 2010Wednesday December 29, 2010Presentation to LBR GroupPresentation to LBR Group

www.donmillerblog.comwww.donmillerblog.com

©© Jellyfish Enterprises LLC 2010 Jellyfish Enterprises LLC 2010 www.donmillerblog.comwww.donmillerblog.com 22

Webinar AgendaWebinar Agenda

Some Background on DonSome Background on Don

DonDon’’s 2011 Plannings 2011 Planning–– ““Brutally HonestBrutally Honest”” YearYear--End SelfEnd Self--Assessment of Improvement AreasAssessment of Improvement Areas

No One Else Will Do It, Right??No One Else Will Do It, Right??–– 2011 Plan & Priorities2011 Plan & Priorities

Managing Personal MomentumManaging Personal Momentum

This TraderThis Trader’’s Perspective on the Concept of s Perspective on the Concept of ““TimeTime””

Maintaining Perspective Throughout the YearMaintaining Perspective Throughout the Year

A Helpful Performance ScorecardA Helpful Performance Scorecard

Reading SuggestionsReading Suggestions

K.I.S.S.K.I.S.S.


A Bit About Don (PreA Bit About Don (Pre--2011)2011)49 Years 49 Years ““YoungYoung”” …… March 10, 2011 is the key date if you want to send black balloonMarch 10, 2011 is the key date if you want to send black balloons s

Education:Education:–– BSBA Accounting BSBA Accounting -- 1983 Bryant College; Executive MBA 1983 Bryant College; Executive MBA -- University of Wisconsin 1998University of Wisconsin 1998

CareerCareer–– 80s & Early 90s: Progression to Telecom Executive80s & Early 90s: Progression to Telecom Executive–– Late 90s to Today: Independent Trader & EducatorLate 90s to Today: Independent Trader & Educator

Active Independent Trader of a Private FundActive Independent Trader of a Private Fund–– 90% of Current Balance Grown From Trading Intraday90% of Current Balance Grown From Trading Intraday–– Member of the CME since February 2004Member of the CME since February 2004

Approx. 3 Million S&P EApprox. 3 Million S&P E--Mini Contracts Traded Mini Contracts Traded [MF Global[MF Global’’s largest nons largest non--institutional volume client in 2008]institutional volume client in 2008]

–– Business Strategy: Provide S&P Liquidity/Speculate via wholesaleBusiness Strategy: Provide S&P Liquidity/Speculate via wholesale pricingpricing

77--Year CME Career Fund Highlights Year CME Career Fund Highlights [Fully Auditable][Fully Auditable]

–– Total ReturnTotal Return 808% 808% -- NOT NOT a boast, but will put principles discussed later in perspectivea boast, but will put principles discussed later in perspective–– Max Peak to Valley Drawdown Max Peak to Valley Drawdown ““Early YearsEarly Years”” 20042004--2006: 2006: (17.7%)(17.7%) ““Seasoned YearsSeasoned Years”” 20072007--2010: 2010: (5.3%)(5.3%)–– Bested Top CTA Return benchmark for asset class in 2008Bested Top CTA Return benchmark for asset class in 2008

Industry Publications & SpeakingIndustry Publications & Speaking–– Technical Analysis of Stocks & CommoditiesTechnical Analysis of Stocks & Commodities -- Various 1999Various 1999--2010 Efforts2010 Efforts–– SFO MagazineSFO Magazine -- Began Daily Blog Diary 2008: Began Daily Blog Diary 2008: donmillerblog.comdonmillerblog.com–– TraderInterviews.comTraderInterviews.com -- Founded 4Founded 4--Week Live Week Live ““JellieJellie”” Training Program 2009Training Program 2009–– MoneyShow.comMoneyShow.com -- Portion of Video Educational Proceeds Benefits:Portion of Video Educational Proceeds Benefits:–– International Traders ExpoInternational Traders Expo–– TradingMarkets.comTradingMarkets.com–– American Association of Individual InvestorsAmerican Association of Individual Investors


Don Don (& Everyone Else)(& Everyone Else)1/1/20111/1/2011


DonDon ’’s 2010 Years 2010 Year --End End ““ Brutally HonestBrutally Honest ””SelfSelf --Assessment of Areas for 2011 ImprovementAssessment of Areas for 2011 Improvement

(Eliminate, Improve, or Simply (Eliminate, Improve, or Simply ““DodgeDodge””))

Grinding MarketsGrinding Markets Improve/DodgeImprove/DodgeGetting the 50 Yr Old A.M. Motor RunningGetting the 50 Yr Old A.M. Motor Running

–– Transition from Globex to Intraday U.S.Transition from Globex to Intraday U.S. ImproveImprove–– 9:009:00--9:30AM ET; After 2PM ET9:30AM ET; After 2PM ET DodgeDodge

Sustained & Prolonged FocusSustained & Prolonged Focus ImproveImproveOccasional Motivation & BoredomOccasional Motivation & Boredom ImproveImprove

–– ““7 Year Itch7 Year Itch””; The ; The ““Now What?Now What?”” YearsYears–– Tao of Poker Rule #286Tao of Poker Rule #286

““YouYou’’re not playing poker (trading) any more re not playing poker (trading) any more …… youyou’’re just throwing yourself into this zombiere just throwing yourself into this zombie--like statelike state””““ItIt’’s possible to get lost in the game itself s possible to get lost in the game itself …… to go too far inside itto go too far inside it””

Energy ManagementEnergy Management–– Shutting Down/Taking VacationsShutting Down/Taking Vacations ImproveImprove

Cutesy Markets (i.e. DAX) vs. Bread & Butter ESCutesy Markets (i.e. DAX) vs. Bread & Butter ES EliminateEliminatePlaying Playing ““Small BallSmall Ball”” on High Probability PJOson High Probability PJOs ImproveImproveTeaching vs. Personal Trading BalanceTeaching vs. Personal Trading Balance ImproveImproveExcessive & Sloppy Slippage via Premature Entries,Excessive & Sloppy Slippage via Premature Entries,Scratching, & ReScratching, & Re--EnteringEntering in Low Volatile Marketsin Low Volatile Markets ImproveImprove

–– Tao of Poker Rule #270:Tao of Poker Rule #270:““A Little Past Playing Good is Playing BadlyA Little Past Playing Good is Playing Badly””““This peculiar geography of poker can be frustrating, because jusThis peculiar geography of poker can be frustrating, because just as the player has arrived at a certain level t as the player has arrived at a certain level of expertise, he finds that by simply thinking ahead one more stof expertise, he finds that by simply thinking ahead one more step ep …… he can be back once again in the he can be back once again in the territory of territory of bad playbad play. This trap is very subtle, and it can suddenly appear, as if o. This trap is very subtle, and it can suddenly appear, as if out of the blue. You can go ut of the blue. You can go one step past your own expertiseone step past your own expertise””..


Don 2011 PrioritiesDon 2011 Priorities

Same as Every Year Same as Every Year …… Improve as a Trader & Person vs. Prior YearImprove as a Trader & Person vs. Prior Year

Manage Weaknesses on Prior Slide, Including Manage Weaknesses on Prior Slide, Including ……

Initiate 9:00 Initiate 9:00 -- 9:30am In9:30am In--Office Exercise RoutineOffice Exercise Routine–– Kill Two Birds with One StoneKill Two Birds with One Stone

ReRe--implement Performance Scorecardimplement Performance Scorecard–– Will Discuss LaterWill Discuss Later

Substantially Reduce Eurex TradingSubstantially Reduce Eurex Trading–– Trade ES vs. Illiquid DAXTrade ES vs. Illiquid DAX

““JitterbugJitterbug”” Rhythms: Energy & Focus ZappingRhythms: Energy & Focus ZappingToo Much Too Much ““Small BallSmall Ball””DAX Minimal Contribution to Bottom LineDAX Minimal Contribution to Bottom Line

–– NegativeNegative when considering when considering ““loss of focusloss of focus”” impact on Bread & Butter S&P P&Limpact on Bread & Butter S&P P&L

Transition to Photon Order Entry PlatformTransition to Photon Order Entry Platform–– Automate Existing Key StrategiesAutomate Existing Key Strategies

The Brain & Reflexes Will Turn 50!The Brain & Reflexes Will Turn 50!–– ChartChart--Based TradingBased Trading

II’’m very much a m very much a ““VisualVisual”” tradertrader–– Inject sense of Inject sense of ““NewnessNewness””

Like Painting the Walls a New ColorLike Painting the Walls a New Color


Don 2011 Priorities Don 2011 Priorities (Cont.)(Cont.)

Improve Transition From 1990sImprove Transition From 1990s--2010 Ultra2010 Ultra--Aggression to a 2011+ BlendAggression to a 2011+ Blendof Capital Preservation, Growth, & Incomeof Capital Preservation, Growth, & Income–– Preservation & Growth Preservation & Growth (via Trading & Equity Trailing Stop):(via Trading & Equity Trailing Stop):

College & Retirement FundsCollege & Retirement Funds–– Met Age 50 Goal of 100% SelfMet Age 50 Goal of 100% Self--Funding via Aggressive TradingFunding via Aggressive Trading

–– Growth & IncomeGrowth & IncomeSeparate Smaller AccountSeparate Smaller AccountFund 100% of Cash Flow Needs Age 50Fund 100% of Cash Flow Needs Age 50--60 via Trading60 via TradingDonate Any Excess to CharityDonate Any Excess to Charity

Take One Sabbatical (Last One: 2006)Take One Sabbatical (Last One: 2006)

Continue to Continue to ““Pay it ForwardPay it Forward”” via Education & Charityvia Education & Charity–– This Industry Continues to Sorely Lack This Industry Continues to Sorely Lack Substantive Substantive Education From Proven TradersEducation From Proven Traders

Kudos to Linda & Team LBRKudos to Linda & Team LBR–– Continue Ongoing Continue Ongoing ““Industry TransparencyIndustry Transparency”” MissionMission

Via realVia real--life blogging & educationlife blogging & education–– Successes, frustrations, challenges Successes, frustrations, challenges …… ““good, bad, uglygood, bad, ugly””

Further Develop LeadingFurther Develop Leading--Edge Training TechniquesEdge Training TechniquesContinue/Increase Charitable Giving from ProceedsContinue/Increase Charitable Giving from ProceedsBetter Balance with Personal TradingBetter Balance with Personal Trading

–– LimitLimit live multilive multi--week efforts in 2011week efforts in 2011


““The Jagged Upward ZigThe Jagged Upward Zig--Zag Graph to SuccessZag Graph to Success””–– Tao of Poker Chapter 18Tao of Poker Chapter 18

Tao Rule #259 (Dealing with Large Wins, Runs, or Tao Rule #259 (Dealing with Large Wins, Runs, or ““Big StackBig Stack”” Poker):Poker):–– ““YouYou’’d like to sit on your winnings and never go downward from this pd like to sit on your winnings and never go downward from this point oint

forward. But somewhere in the back of your mind you realize theforward. But somewhere in the back of your mind you realize the truth: truth: ThereThere’’s nowhere to go but back to the world of risk, where things may s nowhere to go but back to the world of risk, where things may very very well go down before going back up again.well go down before going back up again.””

–– Going forward, known at this traderGoing forward, known at this trader’’s desk as the s desk as the ““Don Miller RuleDon Miller Rule””

A Word to Those Who HaveA Word to Those Who HaveClimbed the Mountain of SuccessClimbed the Mountain of Success

A Reminder (To Self) That WeA Reminder (To Self) That We’’re re Playing the Playing the ContinualContinual Game of Game of

Managed Managed RiskRisk


One Word: One Word: HUGEHUGE

Markets Have Momentum & Pace WhichMarkets Have Momentum & Pace WhichMust Be Understood & ManagedMust Be Understood & Managed–– Obvious, Right?Obvious, Right?

YouYou Have Momentum & Pace Which Also Must Be Have Momentum & Pace Which Also Must Be Understood & ManagedUnderstood & Managed–– Highly Individualistic & Will Vary By TraderHighly Individualistic & Will Vary By Trader

Typical Momentum Typical Momentum ““RulesRules”” Apply to Personal MomentumApply to Personal Momentum–– DonDon’’t Fight the Tapet Fight the Tape–– Milk the TrendMilk the Trend–– Protect Your Momentum Protect Your Momentum ““TradeTrade”” with Stops to Reassesswith Stops to Reassess–– Expect Periods of High Energy, Consolidation, & ChopExpect Periods of High Energy, Consolidation, & Chop–– Trade Trade YOURYOUR Momentum Momentum …… NOTNOT someone elsesomeone else’’s!!s!!

Managing MomentumManaging Momentum


Jesse Livermore, Nick Jesse Livermore, Nick ““The GreekThe Greek””, Archie Karas, Archie Karas

–– And Thousands of Others And Thousands of Others ……

AllAll at One Time Known as The Worldat One Time Known as The World’’s s BestBest Speculators Speculators in their Field, having accumulated tens of millionsin their Field, having accumulated tens of millions–– Livermore was the believed Livermore was the believed ‘‘tradertrader’’ described in described in ““Reminiscences Reminiscences

of a Stock Operatorof a Stock Operator””

AllAll Eventually Lost Eventually Lost EverythingEverything–– In LivermoreIn Livermore’’s case, he committed suicide after not being able to:s case, he committed suicide after not being able to:

Keep to his Rules; andKeep to his Rules; andAdaptAdapt to changing conditions/regulationsto changing conditions/regulations

Managing Managing PersonalPersonal MomentumMomentum



Aligning Self with MarketAligning Self with Market

Market Opportunity

Intensity

Time

MONSTER PERFORMANCE

Personal Rhythm:(A) Strong Focus; Minimal Health Issues,Distractions, or Non-Mkt Obligations

(B) Polar Opposite of (A)… INCLUDING GOOD TRADERS!

FLAT OR LOSINGTrader “Purgatory”

TAKE-AWAY

Performance is as much – if not

MORE – about personal rhythm as it is market

rhythm.

Nurture & Protect It!

The “Zone”

2001-03, 05, 07-09

Portions of 2004, 06, 10


Know YourselfKnow Yourself

My My #1 Rule#1 Rule in All Trading:in All Trading:–– When Things are Going Well, Get Bigger When Things are Going Well, Get Bigger ……

…… When Not, Get SmallerWhen Not, Get Smaller–– Took the LONGEST for me to (1) Implement and (2) ImproveTook the LONGEST for me to (1) Implement and (2) Improve

NotNot ““MasterMaster””–– Floored the Accelerator 2001Floored the Accelerator 2001--2003, 2005, 2007 2003, 2005, 2007 -- Early 2009Early 2009–– Scaled Back Significantly 2006, 2010Scaled Back Significantly 2006, 2010

Periods of Lost Focus, Health & Periods of Lost Focus, Health & ““LifeLife”” Issues, and Personal RhythmIssues, and Personal Rhythm–– Alternating between the accelerator & brake is the Alternating between the accelerator & brake is the primaryprimary reason for the fundreason for the fund’’s s

strong return vs. draw datastrong return vs. draw data

ALWAYSALWAYS have an equity curve have an equity curve ““Reassess PointReassess Point”” (trailing stop)(trailing stop) in placein place–– Livermore, Karas, etc. DIDNLivermore, Karas, etc. DIDN’’T!!T!!

Karas Karas -- in a rare 2008 Interview when asked what his biggest mistakes win a rare 2008 Interview when asked what his biggest mistakes were ere –– said, said, ““Obviously, not pulling up at some point.Obviously, not pulling up at some point.””

–– Personal Personal ““Reassess PointReassess Point”” Hit twice during my Career, including during the 5/6/10 Hit twice during my Career, including during the 5/6/10 Flash CrashFlash Crash

Assessed the ReasonAssessed the Reason““Hunkered DownHunkered Down”” & Scalped Like Crazy& Scalped Like CrazyReplenished capital each time via Replenished capital each time via TradingTrading and and NOTNOT fund replenishmentfund replenishment



““High up in the North in the land called Svithjod, there High up in the North in the land called Svithjod, there stands a rock. It is 100 miles high and 100 miles wide. stands a rock. It is 100 miles high and 100 miles wide. Once every thousand years a little bird comes to the rock Once every thousand years a little bird comes to the rock to sharpen its beak. When the rock has thus been worn to sharpen its beak. When the rock has thus been worn away, then a single day of eternity will have gone by.away, then a single day of eternity will have gone by.””

---- WWritten by Hendrik Willem Van Loon ritten by Hendrik Willem Van Loon & referenced in Don& referenced in Don’’s 1/17/09 blog post &s 1/17/09 blog post &inside cover of the 2009 NY Expo Directory.inside cover of the 2009 NY Expo Directory.

Concept of TimeConcept of Time


Traders Traders MUSTMUST Perceive Time Differently Than OthersPerceive Time Differently Than Others

Trading Gains or Losses Trading Gains or Losses OnlyOnly Do One ThingDo One Thing–– Purchase or Consume Purchase or Consume ““TimeTime””

Trading is Essentially a Remote ControlTrading is Essentially a Remote Control–– With it You Can Fast Forward, Reverse, or Pause Tim e!With it You Can Fast Forward, Reverse, or Pause Tim e!

Time IsnTime Isn’’t Money t Money …… Money is Time!Money is Time!

–– In trading, you can earn the equivalent of a In trading, you can earn the equivalent of a ““normalnormal”” jobjob’’s:s:…… weekly income in a single trade sequenceweekly income in a single trade sequence…… monthly income in a single day or weekmonthly income in a single day or week…… yearyear’’s income in one week or months income in one week or month…… careercareer’’s income over a few yearss income over a few years

Concept of TimeConcept of Time


A Single Trade, Sequence, Day, Week, Month, A Single Trade, Sequence, Day, Week, Month, Year, etc. BY ITSELF is completely irrelevantYear, etc. BY ITSELF is completely irrelevant

OnlyOnly the accumulation over time is relevantthe accumulation over time is relevant

Said another way Said another way ……

Keeping PerspectiveKeeping Perspective


Each dot represents a single Each dot represents a single dayday’’s actual results over an s actual results over an extended span of timeextended span of time

Within each dot may be 5Within each dot may be 5--20 20 trade sequencestrade sequences

Above Green Line = PositiveAbove Green Line = Positive

Think about this the next time Think about this the next time you you ““high fivehigh five”” or or ““stewstew”” over a over a trade result!trade result!

Always think to yourself:Always think to yourself:Tomorrow, ITomorrow, I’’ll generatell generateanother another ‘‘dotdot’’ somewheresomewhereon the chart.on the chart.

Afraid of Afraid of ““generatinggenerating”” all those all those dots below the line including the dots below the line including the large draws??large draws??

Strive to minimize, but theyStrive to minimize, but they’’re re absolutely NECESSARY to absolutely NECESSARY to generate those abovegenerate those above

No Risk = No RewardNo Risk = No Reward

Net Sum of all dots??Net Sum of all dots??

> $2 Million> $2 Million

Keeping PerspectiveKeeping Perspective


NonNon--Numerical Performance ScorecardNumerical Performance Scorecard

Implemented as an Experiment for Q1 09 to Implemented as an Experiment for Q1 09 to ““tightentighten”” things up after some bad habits crept in Q4 08things up after some bad habits crept in Q4 08

Experiment ResultExperiment Result

Win/Loss:Win/Loss:–– # Days# Days 5858--33–– Daily $Daily $ 1111--1 (Both Personal Qtrly Bests)1 (Both Personal Qtrly Bests)

Subsequent Worst Personal Decision Ever as a Trader?Subsequent Worst Personal Decision Ever as a Trader?–– Abandoning the Abandoning the ““ExperimentExperiment”” after Q1 after Q1 …… DUH!DUH!

Bottom Line:

It Works!


NonNon--Numerical Performance ScorecardNumerical Performance Scorecard

Objectives:

� Determine Whether It’s “You”, “The Market”, or Both

� Highlight & Monitor Areas of Weakness

� Provide a Visual Record to Reinforce Confidence

� De-Emphasize Numerical Results … Especially Daily!

� Force Personal Accountability


You find out life is a game of inches. And so is You find out life is a game of inches. And so is football. Because in either game, life or football, football. Because in either game, life or football, the margin for error is SO small, I mean one half the margin for error is SO small, I mean one half a step too late or too early, and you don't quite a step too late or too early, and you don't quite make it. One half second too slow, too fast, you make it. One half second too slow, too fast, you don't quite catch it.don't quite catch it.

Al Al PacinoPacino -- Any Given SundayAny Given Sunday

The inches we need are EVERYWHERE around us.The inches we need are EVERYWHERE around us.They're in every break of the game, every minute, every second.They're in every break of the game, every minute, every second.

I'll tell ya this ... in any fight, it's the guy willing to die I'll tell ya this ... in any fight, it's the guy willing to die who's who's gonnagonnawin that inch. And I know if I'm going to have any life any morewin that inch. And I know if I'm going to have any life any more, , it's because I'm still willing to FIGHT and DIE for that inch. it's because I'm still willing to FIGHT and DIE for that inch. Because that's what LIVING is.Because that's what LIVING is.

The six inches in front of your face.The six inches in front of your face.


Said Another Way Said Another Way ……

The line separating The line separating true excellence true excellence

from mediocrity is from mediocrity is razor thinrazor thin..


2011 Book Suggestions2011 Book Suggestions

If I could ONLY read two If I could ONLY read two ““TradingTrading”” books:books:


A Final Word on PatternsA Final Word on Patterns(From Don(From Don’’s 2010 NY Expo Presentation)s 2010 NY Expo Presentation)

““Everything I Ever Needed to Know About Market Rhythms, Everything I Ever Needed to Know About Market Rhythms, I Learned in I Learned in TradingTrading KindergartenKindergarten””

((Not quite, but you get the picture.)Not quite, but you get the picture.)

Breakouts Lead to TrendsBreakouts Lead to TrendsTrends Lead to ExtremesTrends Lead to ExtremesExtremes Lead to Backing and FillingExtremes Lead to Backing and FillingBacking & Filling Leads to Backing & Filling Leads to ConsolidationConsolidationConsolidations Lead to BreakoutsConsolidations Lead to BreakoutsWash, Rinse, & RepeatWash, Rinse, & Repeat


Said Another Way Said Another Way ……

K.I.S.S.K.I.S.S.and Execute!and Execute!


Final Words on 2010Final Words on 2010

Trading is a game ... nothing more. It pales in comparison to life's true priorities, and simply provides us with the analogy of all analogies, and parable of all parables. It provides us with a unique practice field on which we can learn and then try to apply the principles to life. The better we trade, the better we live, and the better we live, the better we seem to trade.

If someone ever tells you “you can't”, they're dead wrong. If you're breathing, you can and you will . Regardless of what the pundits say or how much the temporary pain may sting, don't ever let anyone take away your spirit and joy for life.

Tonight, we all dance. In part for the joy of personal victory, but for all, the survival of 2010 and the possibilities of 2011. If you’re reading this, then you’re still breathing and I congratulate you. You made it. And you're a year smarter.Excerpts from Don’s 12/31/08

“A Night to Dance” Post


ForgiveForgive Yourself for Any 2010 ShortcomingsYourself for Any 2010 Shortcomings

2010Missed Trades Bungled Exits

Brain Cramps

Woulda Shoulda Coulda


2011

Oh, the Possibilities!Oh, the Possibilities!


Thank You & LetThank You & Let ’’s Rock in 2011!s Rock in 2011!

[email protected]@donmillereducation.com

www.donmillerblog.comwww.donmillerblog.com

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