prop

Dave: How are you doing, Adam?

Adam: Admirably, Many thanks.

Dave: Let's start from the beginning. Could you tell us a little about yourself?

Adam: Certainly. I received two mathematics degrees - a pure mathematics degree from UC Santa Cruz and an applied mathematics degree from the University of California, Los Angeles. I'd like to note, that nothing of that, what I studied at university or school did not appeal to me so much, as shares. IN 1998 year, after training, i got my master's degree. I wanted to get into the realm of Finance, just because it was an awesome topic. I didn't know, what is a share; I didn't know, what is a dividend - I did not know anything. I never went to financial courses, and never took economics courses. It was never required, since Mathematics is the basis of everything. I started filling out my resume and got a call from WorldCo, which was just starting then. This is where I got to.

Dave: You started as an intern?

Adam: Not, i did all the same, what it is now. WorldCo's concept was, what if you learn to hit the ball, they gave you a bat, putting on the field, and you started to beat. You will learn how to hit the ball by actually hitting it, not then, when you are put in a fenced training section and you train there. So everything was for real from day one. I learned valuable principles there.

Dave: I.e, in fact, you started trading with real money from the first day?

Adam: Everything is correct, right from day one.

Dave: How long it took you, to become a profitable trader?

Adam: It's been six months, until my first profitable month has come. Measure, which I prefer to use as an indicator of profitability based on a period per month. If I am talking to a trader or we are sitting with a group of traders, we usually use the month as a measuring scale.

Dave: After that, how was your first positive month, whether profitability continued, or you had your ups and downs?

Adam: After that, how i reached my first positive month, I never had negative again.

Dave: Wow, and this is with 1998 of the year?

Adam: In fact, this is from the beginning 1999 of the year, immediately after the six month period. This is a linear progression? I mean, if in one month I made an amount of X dollars, and next month - Y dollars, was Y always greater, than X? Was there always more every next month, than in the previous? I dont know, but if you look at it graphically, the growth was definitely exponential. I graduated well one month, and next month i could graduate well, but not so much. And suddenly I just took off, and it took me to another level.

Dave: What was your position at WorldCo, when you left there?

Adam: When I started at WorldCo, there was about 50 Traders, and this number has grown to over, how 1000. When profits were rising, we tore markets in 99, 2000-m, 2001-m. During the boom of traders, we realized, that we need people to replace future managers. It was the only way to rule, teach and pay attention to newcomer traders. So what have we done, this is how the initial plan was adopted, which was that, that there should have been ten partners in WorldCo. These ten partners then had to have their own branches.; I was the third partner at WorldCo. My branch was in a Wall Street office, 99, and after a year or two I opened a branch in Los Angeles and moved across the country, managing both.

Dave: According to WorldCo methodology, when did you start, what did you pay attention to at the beginning? What did you trade?

Adam: WorldCo's methodology was, that there were really no methods - not so, like in other trading companies, who pray for a certain method. If you have collected 50 successful traders at WorldCo, then you, I guess, received about 30 different trading methods. You don't have to use one trading method. It very much depends on the style you have adapted to., or style, which someone taught you. There are other companies, who taught one specific style, but WorldCo itself did not teach a specific style.

Dave: Have there been any changes since then? What traders are doing now? They all continue to develop their own systems or you tell them how to trade?

Adam: To make it clear, what I'm talking about, WorldCo did not teach its traders about trading styles; whatever it was, I learned the method from a trader from WorldCo. One of the top traders at WorldCo taught me a specific trading style. This style, which i used with 1998 of the year, I use it exactly the same way today. Work for me 60 of people, who trade exactly the same style. This style of trading is called "tape reading". We do nothing, to be different from that, what did they do in 1910 or 1920. I definitely haven't reinvented the bicycle.. I can't show you the style, which you cannot learn. I have no secret or method, which would work better, than the other. I'm just using the market foundation, which is tape reading; it has always worked throughout 214 years, and will continue to work.

Dave: Do I understand "reading the tape" correctly?: you look at the prints of transactions and you look at the volumes?

Adam: There are many more variables, than just prints and volume. Anyway, prints and volume are two variables in the equation. If you are reading the feed, you are looking at the feed as a whole.. What does the whole tape consist of?? So, you have the last deal (trade), you have a bid price (bid), offer price (offer, ask), volume of demand and volume of supply (bid size, ask size), and the last change. There are many variables, not just the last trade price and volume.

Dave: Does Level II play a role in this?

Adam: Maybe, but we don't trade Nasdaq stock. We only focus on NYSE stocks, so we don't use Level II at all.

Dave: Is there something definite, what could you tell about, therein, what are you looking for, reading the tape?

Adam: Yes, you do that, what are you looking for buyers and sellers in stock. You try to hunt them down, watching the tape. And you rely very heavily on your instinct. Observing, how stocks are traded, you are able to make informed decisions. You can determine where there are buyers and sellers in any specific promotion and at any specific time. Just focusing attention and watching the tape.

Dave: That is, you are trying to join buyers?

Adam: You are trying to join an aggressive buyer in a rally and an aggressive seller in a downturn.

Dave: Is there a specific required position size or number of shares, to trade correctly, using tape reading?

Adam: Depends on the situation ... Each action behaves differently in each situation. Any other traded stock can be very “fat” - that is,. in it you can take a big position. But other time you can trade the stock, which has a very low average daily volume. and in this case you will have to use less volume.

Dave: How much volume is big for your traders?

Adam: I would say from about 5 to 7 thousand shares.

Dave: You, Guys, hold position longer, than just a couple of ticks?

Adam: We track buyers and sellers. Observing, you feel where there is a buyer and a seller, this is how you buy a share, because I saw a buyer. You quit this action, when there is no longer a buyer. It could be a second or six and a half hours. Every situation is different. If I notice, that there is a buyer in the offer, i will buy it. And I will be in this action, until the buyer starts selling. That is, it can be right there or in four hours..

Dave: When you select stocks to read the tape on them, how do you find them?

Adam: I teach my traders how to find such stocks. I do not specify which stocks to trade. I teach my traders how to find stocks for a day to trade.

Dave: Could you tell us in general terms what to look for?

Adam: Certainly, we are looking for promotions, who move. Nothing is more important in this business., than that, what do you focus your time on. If you focus on stocks, which historically does not move, then you're just wasting your attention. You should make sure, that the stock has a good range and can move. You don't need to be in the stock, which historically passes 40 cents per day.

Dave: What's a good range for you? Maybe 2 dollar?

Adam: 2 dollar is very good. Maybe, 1.5 dollar, somewhere in the area. If you just take a look at the daily chart of any stock taken, You have to see, that it has the potential to move in 1.5 or 2 dollar any day. Such promotions are exactly those, which should focus time and attention.

Dave: Do you use scanners, which help you find such promotions?

Adam: Not. It's just hard core research [researh, DZ - prim. per.]. This means reading every news headline., viewing each graph, which falls within a certain range. For instance, you might have 200 Shares, who you know, that they can move along 2 dollar a day. And you need to review their schedules every single day.. You need to read every news headline. Any link, label or website, who can open those things, who might be useful, but it's like reading annotations - you don't read the whole book. Some things you'll be missing out on. You won't have the same good understanding, like a guy, who sat for four hours and read Macbeth [referring to the tragedy of Shakespeare] - the whole book. Are you reading annotations, and you understand, what is it about?, but you don't study the whole article. So one of the things, which I teach and encourage - give all your best. Do your job, so you won't miss anything.

Dave: And you count, that it pays off?

Adam: No questions asked. So many people are looking for short news today. Show me a beautiful flag, show me a nice moving average. These things, perchance, once worked, and once - no, but they definitely don't help me.

Dave: Some of your guys are using technical analysis.?

Adam: Hmm, I have hundreds of traders in my company. For those, who works in my branches and for me are different questions. I'm sure, that many traders use technical analysis. My traders are not using technical analysis for trading, and for the selection of shares. We use technical analysis in the selection, but during the trading day they do not use it when making a decision.

Dave: There is a lot of talk about "bullets" or related put options, which they illegally ceased to use and that, how does this affect short selling [sell short] for prop companies. Do you use similar technologies, when you sell bare?

Adam: Hmm, we are definitely required to use linked put options. But today it doesn't really matter, because these things are not used by the whole Street [Wall Street]. Well, so Goldman should use them., but they don't use them, and Morgan doesn't use them. Game rules revised, since no one really uses them. There are also some tools, which people use in a relaxed way. But in general,, if anyone sells shortly today, he sells freely.

Dave: Meaning, what are you waiting for ap-tick?

Adam: Namely, are you waiting for ap-tic.

Dave: Let's talk a little more about your trading experience. Can you share your worst deal? Also about the largest amount of money, ever lost, and about the stupidest thing, ever committed.

Adam: I'll try. I don’t know about the largest amount.. I dont know, what is the largest amount lost in one particular trade. But I'll tell you the following: I lost 4 500 dollars one day for 8 years of trade, incl. commissions. I think, that I have not seen such a market for 8 years.

Dave: What would you say about your biggest day?

Adam: We've had big days in the past, when we started. I would say: about 30 or 40 thousand.

Dave: And now people have such big days, or they are not so big anymore?

Adam: Certainly, they are not frequent, but some have. Most of all I preach and teach, that money is a habit, and you need to learn this habit. You are not born with this habit. You need to learn it, also, how do you learn to walk or talk. If I ask - "What's your phone number?"- you just dictate it to me, because you know him and this is your reflex. Making money is a reflex, it's a habit. This is what, What do you do everyday, constantly. And this is that, what do i give to my guys, i teach them how to do it.

Dave: That is, you make money involuntarily., subconsciously?

Adam: Correct, it's just a habit. This is what, what am i teaching. You asked: “Do the guys have big days - now and then??». I have traders, who go home with 3 thousands of dollars every day. Take my good traders - stable traders - and you will see, that they are losing money, may be 4 or 5 days a year. Do I have traders, Make 50 000 dollars a day? Not. I didn't have such. We do not invest in dynamite stocks; we don't trade like that. We are very calculating. We move with buyers and sellers. We do not use a reversal trading style, where you can catch the maximum and ride from there down, or catch the bottom, and ride to the maximum. This is suicide. None of my traders have big moves.

Dave: You teach stable money making. Almost like in business.

Adam: That's right, we take little things from the market. In any type of market. Irrelevant, What. Give us a good market, and we'll take a quarter dollar or half a dollar from the market, instead of, to take on little things. Give us a bad market, and we'll take a few cents.

Dave: Talking about cents, have you changed your trading tactics, when we switched from fractions to decimal?

Adam: No changes in methodology. We keep doing the same things - we read the tape. Difference, which I paid attention to - many traders have, who start and never work from 1/16, but traded only on the cent system, - it is more difficult for them to distinguish when a stock is going against them or when a down tick occurs. Since the changes are very small, it seems to them, that the stock rises or falls, but in fact she dropped only by 15 Cents; it's not even 1/8 item. It could just be a down tick or a reversal.. If the price rises by 20 Cents, they can take it as a big leap, when in fact it is if it is 3/16. I think, looking at traffic is a little more difficult for beginners, because they are very cent oriented, than for the guys, who traded with 1 / 16th. 1/16, 1/8, 3/16, 1/4, and you are already on 25 cents above all for 4 Tick. Now for the same movement you need 25 Ticks. Therefore it makes a lot of noise.. For newbies, I think, more and more complicated, since they have to filter this noise.

Dave: The older guys just think of it as 1/4 and 1/8..

Adam: Yes, the look is somewhat different. I think, that we are a little calmer. We just wait a minute and let the market calm down. We would say, that things are just like that, since we have peace of mind.

Dave: Tell us a little about your traders' working day. They come to the office and what they do from that moment, how they sat in a chair and up to that moment, when the market closes?

Adam: For my L.A. folks, the market opens at 06:30 (09:30 across New York). Two hours before the market opens, they go there and start doing research. What does this mean? This means, that they read every news headline. Every headline from the Dow Jones news feed, literally everyone.

Dave: This is the news, which belong to your list from 200 Shares, which you are watching?

Adam: Not, just scrolling through the news. We will read about things, starting from the life of Arafat, and what happens to his medical records in France, and up to quarterly reports of Best Buy. They read about everything, and they need to flip through everything. There may be things, which mean a lot. They read every news headline. Write things down, which may mean something. You are not sure yet, but every thing can mean something. "Hey, i just read, that the Chinese are going to stop importing American steel ". Hmm, China is the largest importer of American steel in the world. If you want to build a building here, you need to wait, because the steel goes there first.

Dave: That is, you take everything, what could have a likely effect?

Adam: Correct, when you scroll through the news, literally every heading. Then it remains about 40 minutes before the market opens, and you personally look at these promotions, to see what news are in them. So you take Best Buy, since you saw, that there is some news in it. And you ask yourself: "It `s that, which means something, or is it that, that it doesn't mean that?»If you think, what does it still mean something, you are looking at the graph. If a stock can move, as we said earlier, you drag Best Buy to the screen. And went to another, which we pulled from the headers. If you do., you won't miss anything, never. Then you start trading. Trade in the way, which we taught you.

And now the market is closed, what are you doing? You view literally every one of your transactions on the tape. You look at every trade you make and see, why did they enter, was the reason for entering correct, and why did you leave, and was the reason for the exit correct. Now you are a strategist. "OU, dude, why did I get out of this paper? I knew, that there was a buyer. I got out because of emotion. ". The beauty of this method is, that when you look back, you throw emotions out of trading. You take the excitement out of making money.. So you are able to see things with a sober eye., that is so, as you need it. Secondly, you are looking at how the day went in promotions, who moved a lot, but for which you, maybe, did not observe. «Look, suddenly Watson Pharmaceutical went hard. Why did she go so hard? Because she received FDA approval for the production of a drug, which you've never heard of, medicine from 15 Letters. Promotion has passed 4 dollar. OK, wonderful." You add a stock to the list. After three weeks you do your research and in one headline you read: "Watson Pharmaceutical Loses FDA Approval for its Drug". Inter alia, it happens every day with pharmaceutical companies. They get FDA approval, and then they lose it. Watson Pharmaceutical Lose FDA Approval For Their Drug From 15 Letters. Just one line in the news, but do you remember, that two months earlier this share had grown by 4 dollar on the news. Now you know significant news for the company. I dont know, where did my guys study, i don't know, what did they learn. But you may not know everything about every industry taken. You can not. So going back and looking, you study. For example, Coach Leather grew up with 3 to 4 Dollars, so car sales have grown. What the hell is going on? I did a little research and found out, that Coach produces all leather for Lexus and Mercedes. But you won't know about it, until you come back and watch everything in a day. Now, when car sales fall, while everyone is looking at General Motors and Ford, i look at coach, easiest deal of the day. With 3000 stocks - an abnormal amount of work to be done, but if you work hard, you will find the right promotions and will not do anything, except the right things.

Dave: When you hire new traders, who exactly are you looking for?

Adam: Thirsty. Someone, who wants to sacrifice time, who wants to study, and work hard. I say it to everyone, who takes the workplace in my gym. It's the hardest work., which you have ever done. If you came for that, to quickly cut some money, don't waste my time and don't waste your time. Save your money. It's the hardest job.. You come, learn how to become a trader, and make a career out of it, not just a two-year membership. Many of my traders have been doing this for many, many years., and they live great, but they worked hard to achieve this. I want to bring this to these people, when I bring them - I invest in them. I invest a lot in them in terms of money., but, Furthermore, I put my energy into them, teaching them. But if they're not here for that, to work hard and give all the best, I do not need them. When I first started hiring Wall Street traders, 99, if you had a Wharton MBA, i took you. If you have a Harvard MBA, i'd take you. But I'll tell you something: i will take any small, who wants to give all the best 100, Working 4 trailer hours and 4 hours after market every day without any Harvard or Wharton MBA. I have a boyfriend in Chicago, who sits next to me, and he's doing great - very, very, Very well. He has been working for me for a very long time.. I took him to work in 1999. He is a year or two older than me and we are friends. Then he moved, to help me with an office in Los Angeles, and one day he told me, I have to tell me something. He said: "I never actually graduated from college, actually.". And his resume had all these degrees. He said, that it feels bad because, what lied to me on the resume. Those days at WorldCo we were overwhelmed with resumes.

Dave: That is, he simply exaggerated his education to get to you.?

Adam: Yes, and this tells me, that this guy doesn't need an MBA. Everything, what this guy needed was hunger. And this guy is not smarter than the rest of the guys., but he works more than anyone. And no small news on any stock escapes him.. It never happened, and never will. He invests time. I have received hundreds and hundreds of resumes over the years, and I have a really brilliant resume. So that it is completely understandable, when i'm looking for a boyfriend, who would hire, then I'm looking for dedicated, Togo, who is hungry and going to work to the fullest.

Dave: Now you are recruiting?

Adam: I always hire.

Dave: Do you have traders, working remotely?

Adam: I have thousands of such traders, working across the country.

Dave: so, let's assume, that a certain trader starts working with you - he invests $5 000. Does he start with real money, how did you start, or does he start with a demo account or something like that?

Adam: They start with a demo account. But I give them a choice. I tell them, that when they feel confident, they can just switch from demo mode to real trading. That is, I definitely give them the opportunity to stay on demo until they feel confident.. Some guys come in and say, what would they like to trade for a demo for a month. But I have never seen, to actually do it. They are always very eager to trade their real money..

Dave: What platform are you using? It is a propriety platform or is used by other companies?

Adam: We use the Hammer platform. It is owned by Assent.

Dave: You, guys, the largest office, or there are more companies?

Adam: I believe, that we are the largest proprietary office, but there is also a big retail side of the company. All proprietary firms have retail businesses. I mean, WorldCo had retail, and they have a branch here. But I think, that retail is much more, than WorldCo itself has ever been.

Dave: A new trader comes to you with $5 000 and trades in real life. What leverage does he get from the start?

Adam: about $100 000, somewhere 20:1. This is where it all begins. I am young and I am aggressive, I never had a trader, who would tell me, that he needs more purchasing power, what we gave. I always give them more, what can they control.

Dave: Thank you for the interview, Adam. Is there something, what else would you like to say?

Adam: Certainly, if someone has any questions and wants to talk to me - write to email [email protected]. If anyone has questions or comments, do not hesitate and contact me.