Wasserman Interview

Dave: How long did it take you
to become profitable?

Adam: It
took me six months to get my first profitable month. The measure that I like to
use for profitability is on a monthly basis.  When I’m going to talk to a
trader, or I’m sitting down with a group of traders, usually the measuring stick
we use is the month.

Dave: After you had your first
positive month, did the profitability continue, or did you have your ups and
downs?

Adam:
After I achieved my first positive month, I have never had a negative month
since.

Dave: Wow, now that was back in
1998?

Adam: It
might have been early 1999 actually, just after the six-month period.  Is it a
linear progression? I mean if one month I made X amount of dollars and next
month I made Y amount of dollars, was Y always greater then X?  Was the next
month always more then the previous month?  I don’t know, but if you look at it
on a chart, it certainly went up exponentially.  I did well one month and the
next month I might have done well, but not as well.  Then all of a sudden
I just shot up through the roof, kind of bringing me to another level.

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

Adam: At
WorldCo when I started, there were about 50 traders and it grew to over 1000. 
And as the profits were growing we hit the big markets, ’99, 2000, 2001. In the
process of the “trader boom” we realized we needed to get people in place as
future managers. This was the only way to manage, mentor, and give attention to
new traders coming in.  So what we did was have an initial plan that there was
going to be ten partners at WorldCo.  These ten partners were then going to have
their own branch and I was the 3^rd partner at WorldCo.  My branch was
an office on 99 Wall Street and a year or two into that I opened up a branch in
Los Angeles and commuted back and forth across country handling both branches.

Dave: Did you commute on a
weekly basis?

Adam: No,
I did it on a monthly basis. 

Dave:  In reference to the
methodology of WorldCo, when you first started, what did you look at in the
beginning? What did you trade?

Adam: The
methodology of WorldCo was that there really was no method–unlike other trading
firms that preach a particular method.  If you pooled 50 successful traders at
WorldCo, you would probably get about 30 different methods of trading.  You
aren’t necessarily going to get one style of trading.  It pretty much depended
on the type of style you adapted to or the type of style that somebody taught
you.  There are other firms that taught a particular style, but WorldCo itself
did not teach a particular style. 

Dave: Have there been any
changes since then?  What are traders doing now? Are they still developing their
own styles or do you tell them how to trade?

Adam: To
clarify what I’m saying, WorldCo did not teach their traders a style; however, I
was taught a style myself by a Worldco trader.  One of the first or second
traders at WorldCo taught me a particular style of trading.  That style of
trading–which I used back in 1998–I still do the exact same thing today.  I
have 60 people working for me that implement that exact same style.  That style
of trading is called tape reading.  We do nothing different than they did
back in 1910 or 1920. I certainly did not reinvent the wheel.  I cannot show you
a style that you cannot otherwise learn.  I do not have a secret or a method
that works better than the next guy.  I just do the meat and potatoes of the
market, which is tape reading; it has always worked for 214 years, and will
continue to work. 

Dave: Let me see if I
understand tape reading.  You are watching prints and you are watching
volume?

Adam: The
variables are a lot more than just prints and volume.  However, prints and
volume are two variables in the equation.  In tape reading, you are watching the
whole tape.  What consists of the whole tape? Well, you have the last trade, you
have the bid, you have the offer, you have the bid size, you have the offer
size, you have the last change.  There are a lot of variables in that, not just
trade and volume.

Dave: Does Level II still come
into play in that?

Adam:
Well, Level II might, but we don’t trade NASDAQ stocks.  We only focus on listed
(NYSE) stocks, so we don’t use Level II at all.

Dave: Is there anything in
particular that you can share about what you look for when you are tape reading?

Adam: Yes,
what you are doing is looking at the buyers and sellers of the stocks.  You are
sniffing that out by watching the tape.  And you rely heavily on your feeling. 
From watching how things trade you are able to make calculated decisions.  You
are able to detect where the buyers and sellers are in any particular stock at
any particular time.  By just focusing and watching the tape.

Dave: So you are trying to join
the buyers? 

Adam: You
are trying to join the aggressive buyer on the long side, or join the aggressive
seller on the short side. 

Dave: Is there a particular
size that you need or a number of shares to properly trade using tape reading?

Adam: It
all depends; each stock in each situation is different.  Some stock that you are
trading might be a very thick stock–a stock where you can take a lot of size. 
However, other times you might be trading a stock whose average daily volume is
very low.  And in that case, you might want to use lesser volume.

Dave: What do you consider a
big position for your traders?

Adam: I
would say about 5000 to 7000 shares.

Dave: Do you guys hold that for
more than just a couple ticks?

Adam: We
sniff the buyers and the sellers.  By watching, you are able to feel where the
buyer and seller are, and so you buy the stock because you are able to see the
buyer.  You exit that stock when that buyer is no longer there.  That can be one
second or it can be six-and-a-half hours.  Each situation is different.  If I
notice there are buyers in a stock, I go ahead and buy it.  I will then hold
that stock until the buyer is selling.  So that can be momentarily or four hours
from now. 

Dave: When you are choosing
your stock to watch the tape on, how do you find those stocks?

Adam: I
teach my traders how to find those stocks.  I don’t necessarily provide which
stock to trade.  I teach my traders the methodology behind finding which stock
to trade for that day. 

Dave: Can you give us a basic
idea of what to look for?

Dave: What do you consider a
good range? Maybe $2?

Adam: $2
is very good.  Maybe $1.50, somewhere in those areas.  If you just look at a
daily chart of any given stock, you are able to tell that a stock has the
potential to move $1.50 or $2.00 on any given day.  Those types of stocks are
the ones you want to focus your time and attention on. 

Dave: Do you have a scanning
program to help you find these things? 

Adam: No. 
It’s just doing the hard basic meat-and-potatoes research.  That means reading
through every single news headline, reading through every single chart that
falls within a certain range.  For example, you might have 200 stocks that you
know can move $2 a day.  You need to go through those charts every single day. 
You need to read every single news headline.  Any shortcut, any scanning, any
website that is going to pick things is going to be helpful, but its like
reading the Cliff’s Notes–you aren’t reading the book.  You are going to miss
out on things.  You are not going to have as good of a feel as the guy that sat
there for four hours and read Macbeth–the entire thing. You read the Cliff’s
Notes and you know what happened, but you don’t dot every I and cross every T. 
So the one thing that I teach and encourage is sheer hard work.  Do the work and
from that you are not going to miss anything.

Dave: And you find that that
pays off?

Adam:
Without any question.  So many people nowadays are looking for the short cut. 
Show me the beautiful Flag-Pennant, show me the beautiful moving average.  Any
of this stuff maybe worked at one time, and didn’t work another time, but it
really doesn’t do much for me.

Dave: Do any of your guys use
technical analysis?

Adam:
Well, there are hundreds of traders at Assent.  For the ones that trade for my
branches and me, it’s a different question.  I’m sure many traders use technical
analysis.  My traders use technical analysis not to trade, but to pick stocks. 
We use technical analysis for research, but actually during the trading day,
they aren’t using technical analysis to make decisions.

Dave: I notice there is a lot
of talk about Bullets or married puts.  Do you utilize anything like that when
you short?

Adam: Well
we definitely used to use married puts. Nowadays it doesn’t really matter
because things like that were taken away from the entire street. So Goldman used
to use them, and they no longer have them Morgan no longer has them.  So the
playing field is now set because nobody really has them.  There are also some
instruments out there that people use in moderation. But as a whole, everyone
who is shorting nowadays is shorting naturally.

Dave: Meaning you are waiting
for an up tick?

Adam:
Exactly, you are waiting for that up tick.

Dave: Let’s talk about your
trading experiences a little more.  Can you tell us about your worst trade ever?
The most amount of money you ever lost, and also the stupidest thing you have
done.

Adam: I
can probably throw a couple out there.  The most money, I don’t know.  I don’t
know what would be the most money I have lost on one particular trade.  But I
will tell you this: I lost $4500 in one day in eight years, and that is
including fees.   I don’t think I had seen that type of market in 8 years. 

Dave: What would you say was
your biggest day ever?

Adam: We
had some big days back in our heyday.  I would say somewhere in the 30 or 40
thousands.

Dave: Nowadays, do people have
big up-days like that, or are they not as big anymore?

Adam:
Sure, they aren’t as common, but people do.  I preach and teach above all else,
money is a habit and you need to learn that habit.  You aren’t born with that
habit.  You need to learn that habit like you learn how to walk and you learn
how to speak. If I ask you ‘What’s your phone number?’ you would just reiterate
it for me because you know it and it’s a reaction for you.  Making money, it’s a
reaction; it’s a habit.  It’s something you do everyday, period.  And that’s
what I convey to my guys, and I teach them how to do that.

Dave: So, it’s unconscious for
you to make money?

Adam:
Right, it’s a habit.  That’s what I teach.  You started off by asking, ‘do guys
have those big days now and then?’  I have traders that are walking away with
over $3000 every day.  You take my good traders–my consistent traders–and they
will lose money maybe 4 or 5 days in the year.  Do I have traders making $50,000
a day? No. I haven’t had that.  We don’t swing for the homerun; we don’t do that
type of trading.  We are very calculated.  We move with the buyers and the
sellers.  We don’t do the contrary type of trading where you can catch the high
and ride it down, or catch the low and ride it high.  You get killed that way. 
None of my traders have big swings.

Dave: You teach consistent
money making.  Almost like a business.

Adam:
Exactly, we nickel and dime the market.  Any market.  It doesn’t matter.  Give
us a good market and we will quarter and half-dollar the market, instead of
nickel and dime-ing it.  Give us a bad market and we will penny it.

Dave: Speaking of nickels and
dimes, do you see a change in your trading tactics as we moved from fractions to
decimals?

Adam:
There is no change in methodology; we continue doing the exact same thing–we
are still tape reading.  The difference that I have noticed with many traders
who come in when they have never experienced a 1/16^th–they have only
traded a penny–it becomes more difficult for them to distinguish between when a
stock is going against them or when a stock is down ticking.  Because the
increment is so small, they see it coming up or coming down but in all
actuality, it’s only coming down 15 cents; its not even an 1/8^th of a
point.  That used to be just a down tick or vice-versa. If it went up 20 cents
they might perceive that as a bigger jump, then in essence it really is, when
it’s just 3/16ths.  I think the perspective on the movement is a little more
difficult on the newer guys coming in because they are so penny-oriented than
the guys that have traded with the 1/16ths.  1/16, 1/8^th/ 3/16^th,
1/4 you are already up a quarter in four ticks.  Now it takes 25 ticks to get
there.  So it creates a lot of noise.  For the new trader, I think it makes it
more difficult for them because they have to filter out that noise. 

Dave: The older guys just
visualize it as 1/4s and 1/8ths.

Adam: Yes,
the perspective is a little different.  I think we are a little more patient. 
We just give it a minute and let it settle down.  We would be saying things more
like that because the patience is there. 

Dave: Tell me a little bit
about your traders’ day.   They come into the office and what do they do from
the moment they sit down at their desk until the time the market closes?

Adam: Well
the market opens for my Los Angeles guys at 6:30 (9:30 Eastern time).  Two hours
before the market they get in there and start doing research.  Well what does
that mean? It means going through every single news headline.  Every single Dow
Jones headline, every single one. 

Dave: And these are the
headlines that come up on your list of the 200 stocks you are watching?

Adam: No,
just scrolling the news.  We will read things from Arafat’s life, what’s
happening with his medical records in France, to Best Buy’s fiscal earnings. 
They read everything, and they need to read it all.  There could be things that
mean a lot.  They read through every news headline.  Write down things that
might mean something.  You don’t know, but it might mean something.  ‘Hey, I
just read that the Chinese are going to stop their importing of US steel.’ 
Well, China is the biggest importer of US steel in the world.  When you want to
build a building here, you have to wait, because they might want it there
first.  

Dave: So you are pretty much
just picking out anything that might have some possible impact?

Adam:
Right, as you go through the news, every single news headline.  Then about 40
minutes before the market opens, you go and individually look at those stocks to
see what the news is on those stocks.  So you picked out Best Buy because you
saw there was some news on it. You ask yourself ‘Is this something that means
something, or is this something that doesn’t mean something?’  If you think it
is, you look at the chart.  If the stock could move as we initially talked
about, you pull Best Buy on the screen.  Let’s go to the next one that we pulled
out of the headlines.  If you do it that way, you miss nothing, ever.  You will
never miss anything.  You go ahead and trade.  Trade the way we teach you how to
trade. 

Now, the
market closes, what do you do?  You go through every single one of your trades
with the time and sales.  You look at every single trade you made and see why
you got in, if it was the right reason and why you got out if it was the right
reason.  Now you are a Monday-morning quarterback.  ‘Ah man, why did I get out
of this thing?  I knew the buyer was there.  I got out because I was
emotional.’  The beautiful thing about it is that when you are looking back, you
are taking the emotions out of trading.  You are taking the excitement out of
making money.  So you are able to look at it with a clearer perspective, which
is the way you want to see it.  Number two what you do is you go look on the day
at stocks that moved a lot that maybe you didn’t watch.  ‘Look, all of a
sudden Watson Pharmaceutical moves a lot.  Why did it move a lot? Because it got
an FDA approval on some drug you have never heard of, this 15-letter long drug. 
The stock moved up 4 points.  Okay, fine.’  You add it.  Three weeks from now
you are doing your research and one scroll across the headline reads ‘Watson
Pharmaceutical Loses FDA Approval.’ By the way, this happens every day with
these drug companies.  They get FDA approval and then they lose it.  Watson
Pharmaceutical loses their FDA approval with this 15-letter drug.  Just one line
in the news, but you remember that two months ago this thing was up $4 on the
news.  Now you know its big news.  I don’t know where my guys went to scroll and
I don’t know what they studied.  But you don’t know everything about every
single industry.  You can’t.  So by going back and looking, you are going to
learn.  For example, Coach Leather was up $3 to $4 because automobile sales were
up.  What the hell is going on? I did a little bit of research and found out
Coach does all the leather for Lexus and Mercedes.  But you aren’t going to know
that unless you go back and look.   So now, when automobile sales go down
while everyone is looking at General Motors and Ford, I’m looking at Coach, the
easiest trade of the day.  With 3000 stocks, there is an enormous amount of
work, but when you do the work you’ll find the right stocks and do nothing but
the right thing. 

Dave: When you are hiring a new
trader, what do you look for?

Adam:
Hunger… Someone who is willing to put in the time, willing to learn, and do the
hard work.   I tell this to everybody who sits down at my desk.  This is the
hardest job you will ever do.  If you came in here to make a quick buck, don’t
waste my time and don’t waste your time.   Save your money. This is the most
difficult job.  You come in here, you learn how to be a trader and you make a
career out of it, not just a two-year gig out of it.  Many of my traders have
been doing this for many, many years and they make a great living, and they
worked their ass off to get to that point.  I want to convey that to these
people that when I bring them in, I am investing in them.  I am investing
in them very much monetarily, but more than that, I am investing in them with my
energy in teaching them. But if they are not here for the long haul to put in
the work and to work their butt off, I don’t want them.  When I first started
hiring at 99 Wall Street, if you had a Wharton MBA, I’d let you work.  If you
had a Harvard MBA, I’d let you work.  But I’ll tell you something, I’ll take the
kid any day who wants to work his butt off who is going to put in four hours
pre-market and four hours aftermarket everyday over any Harvard or Wharton MBA. 
I got a guy sitting in Chicago with me right now who is doing very well–very,
very ,very well.  He has been working for me from way back in the day.  I hired
him back in 1999.  He is a year or two older than me and we are friends.  He
moved out to help me with the Los Angeles offices then, and one day he says he
has to tell me something.  He says ‘I never actually completely college.’ 
However, his resume shows him with all these credentials and stuff.  He told me
he feels bad that he lied on his resume.  Back in the days of WorldCo we were
inundated with resumes. 

Dave: So he basically
exaggerated his credentials to get his foot in the door?

Adam:
Right, what that tells me is that this guy didn’t need to have an MBA.  All this
guy needed to have is hunger.  And this guy is no smarter than any other guy,
but he is harder working than any other guy.  And no piece of news on any stock
gets by this guy.  Never did, and it never will.  He puts in the time.  I got
hundreds and hundreds of people’s resumes through the years and I have some
really sharp looking resumes. Complacency and laziness go with people who are a
little more established and have families, and feel like they have paid their
dues and don’t want to pay their dues again.  So to bring this full circle, when
I look for a guy that I want to hire, I want to hire someone who is committed,
who is going to be hungry and is going to work their butt off.

Dave: Are you guys hiring now?

Adam: I am
always hiring. 

Dave: Do you have remote
traders?

Adam: I
have tons of remote traders across the country.

Dave: What is the minimum
deposit required to trade with you?

Adam:
$5000

Dave: And is a Series 7 license
needed?

Adam:
Actually no, you need a series 62, which is more specific to trading.  Again, my
guys don’t trade NASDAQ and they don’t do options.  They just trade listed
stocks.  All that is required by the NASD and to leverage them is the 62. 
Although, I will say the majority of my guys do have their Series 7,
because for years we were making everyone get their 7 and 63.  But now in lieu
of there being no more bullets, all listed traders need is a 62.

Dave: Can someone trade the
NASDAQ professionally with just the 62

Adam: No,
you need a 55 to do NASDAQ.

Dave: So let’s say a trader
starts with you guys–he puts up $5000 and gets a license.  Does he start with
real money out of the gate like you did or does he start with a demo account of
some sort?

Adam: We
start them with a demo account.  But I give them the option.  I let them know
that whenever you feel comfortable, you can just switch the button from demo to
live.  So I definitely give them the opportunity to stay on demo until they feel
comfortable.  Some guys come in and say they want to run demo for a month.  I
have never found a guy to do that.  They are always very eager to start trading
their own money. 

Dave: What platform do you
use?  Is it a propriety platform or is it something other firms use also?

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

Dave: Are you guys the largest
firm or are there firms that are bigger?

Adam: I
believe we are the largest proprietary firm, but we have a big retail side of
the firm.  All these prop firms have a retail side.  I mean WorldCo had one,
they have one here.  But I think the retail side is a lot bigger than WorldCo’s
ever was.  So I think when we look at numbers, its everybody, the prop and
retail sides. 

Dave: A new trader comes in
with $5000 and he goes live.  What kind of leverage does he get right off the
bat?

Adam:
About $100,000.  About 20:1.  And it goes up from there.  I’m young and I’m
aggressive, and I have never had a trader tell me that they needed more buying
power than we give them.  I always give them more than they can handle. 

Dave: Thanks for joining me,
Adam.  Is there anything you want to leave us with?

Adam:
Sure, if there is anyone who has questions and they want to contact me they can
email me at

adam.wasserman@sungard.com.  If anyone has any questions or comments, feel
free to contact me.