May Your Expectations Be Realistic

Trading With John Joseph

by G. Brendan Burden

John Joseph can tell you first-hand what the difference is between academia and the real world of trading, because he had his ups and downs when he decided to make that transition from the ivory tower to the trading arena. Joseph, an experienced trader, speaker, and educator with five years of experience teaching mathematics at the University of Massachusetts (where he was nominated for the Distinguished Teaching Award), is one of the rising stars in the TradeStation community. He earned a bachelor’s degree in mathematics and biology with a minor in computer science, and earned a master’s in mathematics. There’s a big difference between life as a trader and life as a teacher, and you have to make sure that your expectations are realistic, as he learned.

Joseph is president and founder of The SEMA4 Group LLC, an NFA-member CTA with more than $35 million under management, and is a portfolio manager with LaSalle Street Investment Advisers. He also serves as president of NextDimension Creative Technologies LLC, a firm offering trading-related software and services.

John Joseph was interviewed by Stocks & Commodities contributor G. Brendan Burden.

John, how did you first get interested in trading?

I was in graduate school and assigned an extra course to teach. I wanted to learn to do it right, so I started to look at the stock market and decided to practice. My first trade was in January 2000. I started off as a discretionary trader, but that didn’t work too well.

Why not?

I traded too little. That was right at the height of the dotcom bubble and I got involved with someone who owned a brokerage firm. The trading style at the time was to find a small tech company and hold onto it until it went up by a factor of 10 and then you sold it. Basically, there was no such thing as exits or risk management. It was just a matter of finding a stock that you thought would go up and wait.

What happened with that first trade?

I didn’t know what I didn’t know. I had more balls than brains. If I knew then what I know now, I wouldn’t have done it.It went up then down fast and that was that. So I came out with a loss. I had left graduate school to go work for him and three weeks after that, his brokerage shut down. This made me conclude that trading could be really dangerous. He had been in business for 20 years and within three weeks of my arriving there, he went belly up. I was employee no. 2. It was quite an experience.

How long did it take for you to get back into trading after that?

Three years. I got a job as a product manager and I was doing a lot of traveling, which meant a lot of time in hotels and on airplanes and sitting in airports not doing much. I was responsible for products related to enterprise document management, like online bill payments. It had nothing to do with trading. Anyway, I purchased TradeStation and started looking at systems. Some of them started to work fairly well, and that’s when I decided to leave my job and become a commodity trading advisor (CTA) and full-time trader.

That’s quite a step. How did you get to the point where you gained the confidence to leave your job?

I started backtesting systems and extrapolating forward the results. But I didn’t know what I didn’t know. I had more balls than brains. If I knew then what I know now, I wouldn’t have done it.

…Continued in the January issue of Technical Analysis of Stocks & Commodities

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