VixChange – Trading is a business
Dennis V. Leontyev
Educational Presentation for Potential Students
©Dennis Leontyev
You have probably heard that mentors are essential to building a successful career in Finance.
The recent survey of financial executives, portfolio managers and traders show that 90% of
them credit their mentors for their positive career trajectory. Even the greatest athletes in the
world have coaches and mentors. They all admitted that they would not have won as many
championships if it weren’t for their coaches.
If you can diagnose yourself with a common cold and buy cold medicine, it does not make you a
doctor. Doctors went to school for many years and paid hundreds of thousands of dollars in
order to do their job professionally and receive financial rewards for it. If you can fix your
computer, it does not necessarily make you an engineer, and if you can change the oil in your
car, it doesn’t make you a mechanic. Trading is no different than any other profession. If you
know technical indicators, identify support and resistance levels and predict certain market
movements, it does not make you a trader. It makes you, what is called in the hedge fund
world, a liquidity provider for professionals. True masters of their craft understand that just like
in any job, there are tasks that they enjoy and tasks that must be done regardless of how they
feel about them. If you do not do certain tasks, people who do will separate you from your
money faster than you can say “What the …” Trading is a business – if you want to succeed, DO
YOUR JOB!
If you approach trading from a mindset of certainties, you are in the wrong business. Markets
are all about probabilities, and the main goal of a trader is to place probabilities on his/her side.
There is a huge difference between being right and making money. I have supervised and
traded with hundreds of traders over the last 20 years, and I have never seen a trader who is
constantly on the wrong side. Most people I have met are right more times than wrong when it
comes to markets, but only 10% to 20% of them succeed. The reason is simple: the successful
traders love their losses and approach losing trades with no emotions, understanding that this
is a part of their job. They do not allow negative statistical outliers. If you are looking for
excitement, the best advice I can give you is: go to a casino (at least you will get free drinks
there). When it comes to professional trading, Be a Casino, Not a Gambler!
Trading is all about psychology! Many gurus would have you listen to them for trading ideas.
The only real wisdom, however, comes from listening to yourself. I have had a privilege to work
with and learn from some of the most successful financiers and traders, and regardless of their
styles or instruments they trade, they all taught me that it takes hard work and focus on
becoming an expert. By the way, my favorite definition of the word “expert” is someone who
has made every possible mistake in a very narrow field. By that definition, I definitely qualify.
In order to get there, you have to follow numerous rules religiously. Some of them are:
1. Do your homework. If I don’t do my homework, I don’t trade the next day. Period!
2. Plan your trade, trade your plan. As a musician, I enjoy improvisation. As a trader, it is
not allowed. Period!
3. There is no such thing as a missed opportunity. There are millions of opportunities
everywhere in the markets. Why would you care about the one you missed? If you do
points 1 and 2, you will see that “missed opportunity” is a meaningless concept.
4. The only person on the other side of your trade is YOU! You are not trading against
institutions, robots, hedge funds, etc… You are trading against yourself. The market is
just a field of complex moving parts. It is up to you how to take advantage of it.
Everything else does not fit into the equation of making money.
5. I don’t care where the market is going. Your job is to make money by placing
probability on your side. Why would you care or cheer for the market to go one way or
the other? The market doesn’t care what you do, and you should not care about the
market. This is a healthy working relationship. Care about your loved ones, not the
market.
6. Markets are easy – I am difficult. If you don’t see anything interesting, don’t do
anything. You are not a broker; you don’t get paid by the number of trades you do. It is
always fascinating to observe my dogs chasing squirrels – they run around, bark, get
everybody excited, wake up the neighbors, but never catch anybody. On the other hand,
my cat sits on the fence looking bored and disinterested in times of hunting, but
simultaneously calculating every move. He caught hundreds of birds in his life.
Regardless of whether you are a cat person or a dog person, you have to learn from a
cat when it comes to trading.
7. What we see mainly depends on what we look for. It is tough not to have preconceived
notions. Many traders develop an opinion and then try to justify it with indicators. In
reality, the opposite should be the right process. We are all humans, and it takes a long
time to achieve objectivity in this profession.
8. Develop your trading style. Just because someone is making a lot of money trading
certain instruments or a time frame, it does not mean you will. The trading style must fit
your personality.
9. Trade like a scientist. This industry is all about risk-adjusted returns! Nobody cares in
the hedge fund world how much money you made trading. They care, however, how
you made it. There are numerous approaches to trader evaluation, which are a must for
self-analysis. Sharpe ratio is the name of the game!
10. Even the best traders have periods of drawdowns. You will, and I will, and everyone
else will. It comes with the territory. Do not let it change your thinking or change your
style. Here is a sports analogy, ask yourself a question – do you know many athletes in
the history of any sport who went undefeated in their careers? There are no holy grails
in this business! And there are no secrets!
Did I disappoint you? Did you really think that trading on Wall Street is easy?
Yes, some traders turned $10K account into a million. Some people win a lottery. Trust me,
there are a lot more lottery winners. There are outliers in everything. I have in the past, and I
will, in the future, have incredible positive trading runs, which makes me feel that I can do no
wrong. As soon as I think that, the market smacks me on the head and humbles me. You
probably have, and I am certain you will have the same runs.
Our products and services are
designed to smooth your learning curve during the path of becoming a successful professional
trader. A trader who will make a good living doing what he or she enjoys. A person who
succeeds at that never-ending chess match called The Market.
I am not “hot money”. I am a hedge fund manager who specializes and excels in the following
fields (among others):
1. Day Trading (stocks, ETFs, planning, homework, trend/range analysis, identifying candidates,
execution, entries, stops, exits, position sizing…)
2. Technical Analysis (chart reading, application of known indicators, proprietary indicators…)
3. Tape Reading (internal indicators, money flow, breadth, volume, sentiment indicators…)
4. Floor trader techniques (scalping, TICK, TIKI, Volatility indicators…)
5. Pairs Trading (ratio trading, technical applications to pairs…)
6. Basket Trading (complex basket analysis, creating your instrument…)
7. Mechanical and Automated Systems (none of our systems are based on technical analysis, they
are based on intermarket relationships)
8. Back Testing (testing your ideas and indicators, software…)
9. Volatility Trading (VIX and other volatility derivatives trading, systems, prop indicators)
10. Options (options from very basic to complex trades)
11. Options enhanced pairs trading (application of complex options strategies to pairs)
12. Volatility arbitrage (trading volatility as an asset class, complex strategies on two or more
instruments)
13. Inter Market Analysis and Indicators (proprietary indicators applications to intermarket
relationships)
14. Statistical trading (Sharpe Ratio, self evaluation, performance volatility…)
15. Psychology (do your job, start making money!)
I learn a lot from my students, and I am absolutely certain that by utilizing my products and
services and by watching me trade and analyze the markets in real-time, you will learn a lot as
well. I want to thank you in advance for becoming a member of our community.
Sincerely,
Dennis V. Leontyev
