Introducing Our Newest Trading Heavyweight...
I have an important announcement to make today…
As you know, we have a fine stable of writers that contribute to The Daily Edge (like Jim Rickards and David Stockman). But today, we’re going to add a new heavyweight to our ranks…
Up until now, we’ve been missing a direct connection to the markets. And for a market-based e-letter like ours, that’s a big problem.
That’s why over the past few months I’ve been looking to add an all-star trader to our ranks.
Someone that could help guide Daily Edge readers, like you, through market opportunities on the upside and down…
But finding an A+ trader (that’s willing to come onboard full time) isn’t easy.
To be sure, the best traders are in high-demand or keep a low-profile – after all, they don’t like sharing their trading secrets with anyone.
But today I’m happy to announce that we’ve found an exception… Alan Knuckman.
Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.
Transitioning from a clerk to a floor trader has given him an inside view of the markets that normal investors don’t have. It’s also given him a sound trading edge to profit in all market conditions.
Alan is a regular commentator on major financial news outlets like CNN, Bloomberg TV, Fox Business Network, CNN, Sky News and CNBC. And today, he’s the editor of Weekly Wealth Alert.
Needless to say, Alan knows his way around the trading floor and today’s markets. That’s why I’m so excited to bring him into The Daily Edge stable. And get his market insight into your hands – and it all starts right now.
After all, today’s markets are demanding.
You’ve probably heard me say it before – but if not, I’ll say it here again…
The “easy” days of investing are over. Today’s market requires insight, ideas and strategies that simply didn’t exist before.
With another expert in our stable, you’ll stay ahead of the rest. With strategies and actionable ideas that can keep your rich retirement goals within reach.
That’s why as soon as we signed Alan to a contract, I sat down to interview him. And as anticipated, within minutes Alan revealed a few trading tricks that I think you’ll like — plus, a whole lot more. That’s the power of a heavyweight trader.
Read below for my full interview with Alan and keep your eyes peeled for more content from this former floor trader. The markets are changing, and as a Daily Edge reader you’ll have the inside track.
So without further ado, here’s my in-depth conversation with our newest trading heavyweight, Alan Knuckman…
My Exclusive Interview With Former Floor Trader, Alan Knuckman
Zach Scheidt: Alan, it’s great to finally sit down and ask you a few questions about your experience as a former floor trader, and to get some tips for our readers. I hope this is the start of a long, profitable relationship. Welcome.
Alan Knuckman: Thanks, Zach. It’s great to be onboard here with Agora Financial and The Daily Edge. The markets are changing and I think I’ve got a VERY unique perspective that your readers will appreciate.
Zach: So let’s get to it. How has investing or trading evolved over the past three decades in Chicago and on Wall Street?
Alan Knuckman: Wow. Let me count the ways.
People talk about automation and industries changing.
We used to have travel agents… we used to have bank tellers… we used to have gas stations (oh wait, we’ve still got those for now).
But nowhere has the tech-boom been as hard-hitting as on the exchange floor. There used to be 15,000 guys down on the floor in Chicago alone. Now? There’s maybe a thousand on any given day.
And you’ve got to understand, what floor traders were able to do here was a very specialized vocation, and it’s not really translatable anywhere outside.
Technology has changed everything.
And in the best imaginable outcome for everyday investors, this change in technology leveled the playing field. We’re looking at quite possibly the BEST time in history — let me say that again, in history — for the everyday investor, because there’s no longer barriers to entry.
The guys on the trading floor are no longer here. They don’t have the advantages that they used to. Technology has leveled the playing field, not only from the standpoint of the trading floor, but the tools that an individual investor can use, were only for the reserved few. Morgan Stanley and Goldman Sachs once had the best technology on the trading floor. Now everyone has the same ability to execute an order at lightning speed. This is a revolution in trading.
Zach: Can you give us a look into that world, what was it like to enter a trade 2 or 3 decades ago compared to now?
Alan: Well, first up I don’t want to demean the process. 20 or 30 years ago when I got started, trading was efficient. It was very efficient and that’s how business was done. We’re talking about millions and millions of contracts traded for a hundred years in that same manner. But it was very labor-intensive, and that’s why there were a lot of people on the trading floor.
An order would come in from an individual to the trade desk, and then the trade desk would have to write down the order, hand it physically to someone who would carry it in to the corresponding pit or post to execute the trade. Then it would be hand endorsed, when it was bought or sold, put on the ground, someone would pick it up and bring it back to the desk, and the desk would call the individual investor.
It was an arduous route, but it was very efficient and everything was done in a matter of a couple of minutes. But let’s remember, at the time was an efficient route, as millions and millions of contracts and billions of dollars were exchanged in this manner.
Of course, a couple of minutes is dramatically different than the nanoseconds that some people deal with nowadays.
Fact is, right now you can click your computer or smartphone and instantaneously buy or sell anything, anywhere around the world, any time day or night. The opportunity now is so much greater than it was when I was a young trader.
Zach:What’s the best market to be in these days?
Alan: That’s a softball question. There is no so-called best market to be in.
Opportunity comes in so many different shapes and forms. It depends on your time frame, depends on your risk tolerance and so forth. But the key is, now that the playing field is level, there are unlimited opportunities.
When I was younger, you would trade in one pit, and your opportunities were limited to that market. If something wasn’t happening and the markets weren’t moving, you were hard-pressed to make money.
Now, I can trade any market, any direction, any time, just looking at a screen. It also allows me to be much more patient for great trade set-ups. That wasn’t a luxury that pit traders had back in the day.
The story I always tell is being in the Treasury Bond pit. That’s back when I was trading for myself. Some days the market wasn’t moving. You had two choices:
- You could force a trade. Which often that led to losing money. And we all know how that works…
- You could leave.
You see, because I couldn’t just step into another pit or another post, I couldn’t trade another market because I was designated the Treasury Bond market. That was it. So I couldn’t just step in somewhere else and start trading.
Everyone had their own territories and their own markets. But oftentimes I would just leave the trading floor. I lived right by Wrigley Field here in Chicago, so I would watch a lot of baseball. My girlfriend at the time, who became my wife, she would call me in the afternoon (this was right around the time when Motorola introduced its “brick” cell phone.) Oftentimes I would be at the ballpark and I would have to explain to her that I was actually saving money by NOT being in a pit trying to force a trade. (And that was the truth!)
Things are much different now.
There’s opportunity everywhere. Like I said, so many markets. Stocks, bonds, treasuries, options, currencies, Bitcoins… There’s always something to take advantage of in the current market environment…
Zach: Okay, what can you give us in terms of market secrets or trading tips?
Alan: Okay so you want the dirty secret of floor traders?
Well first up, floor traders were not great traders. They were great at what they did. What they did and their success was dependent on who they stood next to and who they were able to trade with. If you’re standing next to a big hedge fund or a big bank and you’re taking the other side of their trades and making the edge on the other side of their trades, you’re putting yourself in position for success.
As for trading tips…
One of the things that I don’t think people respect enough is the ability to scratch on a trade.
Sometimes the best trades you ever make are trades that you don’t make any money. But, importantly, you don’t lose any money on. You gave yourself an opportunity, but it didn’t cost you anything. That’s one thing I try and impart on younger traders is learn how to scratch on a trade. Learn how to breakeven. Breakeven isn’t a bad word.
It’s the same with losses. Learn how to take a loss initially, a very small loss, because losses are just part of the game. Some of the best traders I ever worked with didn’t think of each trade as a win/lose game. It’s not you against the market. You’re going to have winners, you’re going to have losers. What you’re looking for is probability in the long run to be successful.
The other thing every good trader has is a plan.
You have to have a plan of where you want to get in a stock and a plan on where you want to get out.
Look, there’s so much more volume and so much more liquidity and such tight spreads nowadays, you’re going to get in when you want, you’re going to get out when you want. So you can execute your plan.
So you can’t blame big loses or failed trades on the markets these days. The markets are efficient.
That comes back to mentality. You have to have the right mentality to make money in today’s markets. That’s one of the main issues that prevent people from executing their plan, it’s mainly the fight amongst themselves, that they don’t want to take a loss or they don’t want to admit they’re wrong and they hope that the markets come back, they hope things can get better.
That’s no way to play today’s market.
Zach: Okay, Alan, one last question for today…with all the talk of “Fake News” and the mainstream media. What do you think about the financial media?
Alan: Well, when it comes to financial TV you’ve got to understand what the motivation is. It’s “infotainment”.
I do a lot of these shows and I try and be more specific about what I’m looking at, where I’m looking at it, what my expectations are, what I’m looking to risk on the trade, and how I’m looking to play it. I’m not just talking broad strokes here. But you’ve got to remember, it’s entertainment. It’s designed to keep you watching for hours and hours, so that you feel that you’re not going to miss anything.
What I’d tell your readers is that if you’re going to watch the financial media you need to understand the emotions involved. They’re not in the business of helping you make money.
They’re in the business of selling advertising. That’s how they make their money. To do that, they’ve got to keep you engaged, and they’ve got to keep you psychologically involved. That could be through fear, that could be fear of missing out, fear of something unexpected happening. Understand there’s psychological motivations behind these financial channels. Understand what that’s all about.
At the same time, there’s valuable information that you can get from listening to the mainstream financial outlets. I don’t know how much of it is actionable, specific actionable trades. Fact is, there are very few guys that would go on TV and say: “Okay, buy this” or “sell this.” But sometimes they can help you build your knowledge base.
What you guys do here at Agora Financial is much better. I like the fact that it’s independent. You’re not getting paid by advertisers, etc.
In general though, what’s most important for your readers is having the confidence and the comfort factor that you understand what’s happening in the marketplace.
Right or wrong, no-one’s going to be able to tell you what’s going to happen in the future. But right or wrong, at least you have that confidence that you know the information you need to know to move forward and identify opportunities.
And right now from my perch that means looking at high probability trades and executing them through efficient electronic markets. It doesn’t get much better than that.
Zach: Thanks, Alan. I think you covered some great stuff to get us going here and really thinking behind the scenes of the markets and the mainstream media. I’ll be sure to sit down with you again soon. But for now welcome aboard, we’re glad to have you on our side.
Alan: Much appreciated. Thanks, Zach. Glad to be onboard.
Here’s to growing and protecting your wealth!
Editor, The Daily Edge