The MrTopStep Trading ‘Collective’ and Upcoming BootCamp

on January 10, 2016

floor

If there are any truisms when it comes to trading the only ones winning everyday are the robots. What used to be a simple game of knowing your charts has turned into an electronic arcade where algorithmic and HFT trading programs control the flow. Like last Fridays drop down to 1919 on Globex, then the rally all the way up 2064.75 after the jobs report, and then the selloff down to new low at 1910.00 late in the day…Is that normal? Or is that new normal?

As the markets move into 2016 I want to go back and talk about why I made MrTopStep, what I think it stands for, and what I believe it offers traders. Pre- 2007 credit crisis, or 9 years ago, our trading desk on the floor of the CME Group in the S&P’s had an instant message server with over 550 banks, hedge funds, and prop trading firms connected to the floor. What did they want? Trading flow! When we moved to a new firm the compliance department wanted the desk to cut out all the companies on the instant message that we’re ‘not using the desk’. Many of the firms and traders had been on the instant message for many years but we had to ‘clean’ it up. We sent out warnings to the list saying that they were going to be cut off if they didn’t use the desk. We hated doing it because many of the traders had used the desk when they were at other firms, but when they moved they had to use the desk the new firm used, or sign new paperwork to use our desk. We knew the IM, or instant message, was popular and while some customers did step up we were still left with the disconnection of over 350 IM’s. Many people complained and gave us a hard time, so we decided to put it off a few months before pulling everyone, but the 2007 credit crisis solved that problem. Over the course of the next two to three years, the demise of Bear Sterns, Lehman Brothers and Bank of America (the desk largest account), who had been pushed into a deal by the government to move to Merrill Lynch, took care of the rest of the dirty work of pulling people off the IM. By 2010 the desk instant message was down to fewer than 130 from over 550 traders at the peak. Funny, we did all the AIG S&P futures and spreads for years.

One by one trader’s we had known for 10+ or even 20+ years left, not just temporarily, many never returned. The head of trading at Bank of America, and a very good friend, was Raj Malhotra. After Raj was forced to shut down his profitable trading desk at B of A and turn it over to Merrill, he set up a new desk at Nomura. A year or two later called me and said “Hey Danny, it’s Raj. You are the first one I have called; I just quit Nomura. Whenever I am making money they tell me to trade larger, when I am losing they tell me to trade smaller, and I am in and out of compliance meetings all day.” Today Raj is one of the Big Apple’s best known stand up comedians. By the time Raj was doing his first show in NY, the desk IM was down to less than 100 firms, and today there are less than 40 firms left on it. Everything we used to do has been replaced by a computer, and that doesn’t just go for the trading floors, that goes for Wall Street and all the services they used to offer clients.

While Raj made it as a comedian, I knew the end of the floor could not be that far off, but what was I going to do? Leave an occupation that I had been part of for over 38 years? I saw what was happening to many of the desk and floor traders on the CME/CBOT, and I knew I needed a plan, so not long after the beginning of the credit crisis I started MrTopStep.com. I learned a lot about how to handle customers and I understood market ‘flow’. I knew I did not have the technical background needed, but I knew from helping big and small customers alike, that there had to be something in there I could share that would help people. It was not about selling a magic potion or promising big returns, it was about applying some of the common sense trading rules we lived by on the trading floor and converting them into something that could be shared with the public. Understanding big order flow, how program and algorithmic trading and headline news affect the markets, and everything else in between. Years ago there were just a few moving parts, today there are hundreds.

I grew up in a middle-class Irish Catholic family of six girls and four boys. My dad ran a printing company. The upper half of the family got to go to college and travel, but the bottom half, including myself, didn’t get that advantage. I had to choose, and one night, sitting in a bar Forest Park Illinois, a lady by the name of Mary Clare Kane offered me a job on the trading floor of the Board of Trade. I took my dad to work that day, parked the car in the parking lot, and started to walk across the lot in the other direction. My dad, who was an Irish Marine that went to Notre Dame, yelled across to me, ‘hey son where you going?’ I yelled back, “to the board of trade!” I know many of you have heard this story before, but for those of you who’ve had to crawl your way up you know how hard it is, and I crawled my way up. From the grain room, to the bond bit, to the S&P 500 where I built the largest index operation in terms of volume according to the CME monthly statistics. From there I traveled around the world. In London visiting ABN Amro and GLG Partners, to Dubai doing work for Sheikh Mohammed’s Dubai Holdings, to ADIA in Abu Dhabi (the worlds largest investment firm http://www.adia.ae/En/home.aspx, to Thailand, to Spain, and all throughout Europe. I pursued my dreams. I push myself to the limit, and I still do today. Trading clearly is the thrill of victory and the agony of defeat. I’ve seen it all. I have seen multi-million-dollar accounts turned into billion-dollar accounts, and I’ve seen billion-dollar accounts turned in a multi million dollars accounts, and then into dust. I always looked at it one way, when I took an order on the floor I didn’t care if it was a 100 lot, a 500 lot, or 1 lot, it was somebody’s money and I was there to make sure that money was protected. I fought and I fought against a system that invited customers to play but didn’t protect them. My partner Brian and I were the last people to leave the trading floor on the Friday night of the 1987 crash. It was a big mess, cards unmatched, buys and sells and prices not matching up, and then we had to be the on the trading floor at 5:00 am Saturday morning for a special outtrade session. The desk had been through so many big ups and big downs, so many big crashes and rallies, I can’t even remember them all. All I know is that the system had to change, and while the floor locals and order fillers of that time may have cursed electronic trading, it leveled the playing field, or at least temporarily did.

While front running is a thing of the past on the trading floor, the algorithmic and HFT trading programs have picked up where the open outcry system left off, taking money out of traders accounts. Not only have these programs made it harder to trade they have helped to expand the daily moves of the S&P. What I used to do on the trading for those 550 banks, prop firms, and hedge funds got harder to do. I didn’t have the big orders that I used to have, and I didn’t have the UBS program trading business to back it up, but what I did have was over 38 years of experience dealing in the markets for customers. At one point I was going to go back into the printing business and work for my brother Bill. I even went so far as to try to strike a deal to leave the business, but when it came down to the money side of it, he reminded me that there was no way to make as much money as I could working on the trading floor. I took his advice, I stayed on the floor, and in the final years of being down there I created MrTopStep.com. The idea was to take some of that knowledge and roll it into a trading forum and informational trading and news website. To go back out to some of those traders that were still in the business but no longer on Wall Street, or prop traders in Chicago that still love to trade, or an x-floor trader, or some of the customers that used the desk back in the day. Today MrTopStep continues to be on the forefront of helping traders understand the ins and outs of trading. News, education and trading all rolled into one. With great traders like @FuturesTNT, or @ChicagoStock, or William Blount, or Rob from DTG, and a host of other traders, all providing flow, news, and trade ideas in real time on the MrTopStep trading platform.

Risk has gone up and with that so has the space that algorithmic and HFT trading makeup in the futures markets. Being a lone trader has become harder and harder to keep up with. That is why I created MrTopStep.com and its trading forum. As I’ve said many times this is not a game of 21-year-olds anymore. This is a game of traders that have been around for a while. If you or any of your trading friends would like to be part of the MrTopStep trading forum the best way to see what we do is to join the upcoming boot camp. It’s a very inexpensive way to get a five day look at what we do and how we do it, and it’s open for everyone to see. Is every trade a winner? No, not every trade is a winner, but if you took a sample from our trading room they would tell you that this is the best forum for keeping up with the daily swings of the S&P 500 futures, bonds, and crude oil.

My name is Danny Riley, I have been in the futures and options industry since I was 18 years old, over 38 years. If you do join our forum and it doesn’t fit your trading style we have a 100% return on your money. Things have become much more complex and we believe that ‘the minds of the many are far greater than the minds of the few.” I have always said that if you are interested in joining MrTopStep, do it when the markets are moving…

Hope to see you in the MrTopStep bootcamp, lots of new, good things are going to go on there.