PROPRIETARY TRADING IS DEAD!

Oh really? I must not have gotten the memo. Am I the only one making money day trading this market? I don’t think so. As lead moderator of the Pristine Proprietary Trading Room, aptly named by its members as, “The Black Room”, for consistently putting our traders “in the black” , I can attest that the heartbeat of proprietary trading is pumping harder than ever.

Trading is boring. Well, it should be anyway, it’s making money that’s fun! Any good trader knows that they need to wait until they find “the picture of money” before they would ever consider taking a trade and this can be a test of one’s patients and discipline. In the words of the great Tom Petty, “the waiting is the hardest part”. Much like music, trading is a language; it can be written and read. Sifting through the CRAP (Can’t Recognize A Pattern) until we find the picture we’re looking for can be like shoveling through miles and miles of earth just to find a single pebble of gold. Have you ever considered that you might be digging in the wrong place? It’s quite possible that the gold you’re looking for could quite literally be lying in your backyard and all you need to do is bend down and pick it up. Sometimes new words or quotes are added to the English language, for example, Paris Hilton’s “That’s Hot” was added to the Oxford Dictionary. Yes, I kid you not. With at least 70% of the markets volume being made up by HFT’s, do you think it might be time to add some new words to your trading language? I do and have done so. What are you planning to do to change your strategy to suit the current market conditions? Well, one of the words and pictures of money that I’ve added to my trading vocabulary is “Shakeouts”.

On most days I trade from Pristine’s Proprietary Trading Floor in White Plains, N.Y.  I love to trade and love being a prop trader. The ultra low commission rates and high amount of buying power offered to prop traders is simply unparalleled, all while having an extremely low risk deposit. The office next to our trading floor happens to be another firms trading floor and shall remain nameless. Lately, the volume of their screaming has increased as has the frequency in which their chairs are being hurled against the back of my wall. I can’t help but laugh, don’t get me wrong, I don’t mean to be mean, I just find it funny. What’s funny about it is that as they are being shaken out, I am just first entering. As a matter of fact, I wait for the shakeout to occur BEFORE I ever even enter the stock, then I just buy it on the shake and ride it all the way back up to where the guys next door just stopped out. Crash! Bang!

“Shakeouts” are occurring more and more frequently and are not going away any time soon. My strategy for playing them is simple and is based solely on the Pristine Method of trading. A bullish stock that is at or near high of the day and just falls out of the sky, for no apparent reason, on a spike in volume straight down to support. Bam! Just buy it and take the ride. This is a low risk, high reward strategy that has helped keep The Black Room in the black and should be added to any traders trading language.

<p>  *Jonnie Davis is lead moderator of  the Pristine Proprietary Trading Room, a co-author of the <a href="http://www.pristine.com/events/moreeventinfo.aspx?showreg=1&amp;nseventid=1250" target="_blank">Pristine prop  program</a>, senior mentor, as well as “The Face of Trading” in the October issue  of Active Trader Magazine. <a href="mailto:jdavis@pristine.com">jdavis@pristine.com</a></p>