thalestrader

The finish line is one million dollars in profit. I think that we will at the very least give special recognition to whoever is closest to the finish line at the end of week 20. As to continuing after that point, that will be a function of the level of interest and participation by the still active racers at that point. We might continue this thread, or perhaps we'd call it quits at 20 weeks, and start a new thread (The Race II?) and do it all over again. So, I guess the best answer is, "we'll see..." But I definitely think that if no one hits the million mile mark by the end of week 20, we still give honor to whoever is sitting closest to the finish line at that time. Best Wishes, Thales

I am not following you here. No matter how many times I read the above sentences, I cannot understand what you are doing there. I'm not criticizing you, and I suspect any fault lies with me. I'm just saying I do not get what you mean,. I think I am especially confused by what you mean when you say you are ignoring the days that don't close the gap at all. Have you run the back test on the cash S&P index? Have you run the data on the NYSE index? Best Wishes, Thales

1) Targets are a function of current volatility, and they can and will change over the course of The Race with changes in volatility. 2) Currently, the initial stop must be 14 ticks or less, though this too can change, e.g. if volatility increases, I will go to a max 16 tick initial stop loss, if volatility decreases, max stop loss may decrease to 12 ticks. I believe that my largest initial stop loss this week was 12 ticks, and that happened to be a loss. My average initial stop loss this week was 8 ticks. My average profit was fractionally below 16 ticks, so for the week, on an admittedly too small sample to tell us anything, I ran a +1.9R average profit. I am optimistic that as the sample size grows, that should increase to about +2.5R. 3) This is very much a work-in-progress. Unlike sicko, who has been through this exercise before, this is my first whack at making a purposeful effort to trade a small account to a million in 20 weeks. Additional money management rules, guidelines, etc. and so on may or may not develop as I move forward. Sicko and has the benefit of approaching this task as it ought to be approached, i.e. he approaches it from a gambler's perspective; and that perspective is lacking on my part, at least to the degree that sicko is able to muster. I would suggest that there is likely much more to be learned in this regard by aiming some questions at sick, as I am a rookie in this venue. Best Wishes, Thales

The Race - Week One The following shows the miles completed as of the end of week one by each of the declared racers. I also thought it would be interesting if we tracked the total miles of the participants combined, just to see what effect a small band of Pikers can have on the money flow over the next twenty weeks. A good week all around, with none of the Racers who actively traded during Week One finishing the first week in a draw down. Best Wishes, Thales PS If any Racer notices that I have made a mistake in calculating his or her miles completed, send me a PM, and I will correct and post a correction Monday evening, should it be necessary.

Excellent contribution, Blowfish. This is why I keep referring to the "puzzle and problem of trading a small account" (in the context of the objective of The Race). However, you explained it so much more clearly than I ever could have hoped to do. Thank you! Best Wishes, Thales

If you think back to the discussions about chop zones in the Reading charts thread, a range day would be one where the market establishes a chop zone, a range contraction day would be where the market continued to vacillate witin the chop zone making lower highs and higher lows. I think that it is a mistake to try to game a system by trying to figure out when a day will be a trend day, range day, contraction day. If you are going to trade a system, trade the system. The one advanatge a mechanical system should have over discretionary trading is that it takes the emotions out of the trade. Once you introduce even the slightest element of discretion, you lose that one advantage and are instead left with the worst of both. Best Wishes, Thales

Thank you for sharing. The only thing I would tweak would be to point out that when Vic used the 90%-95% odds, he was saying that if the Gap did not fill soon after the open, there was a 90-95% chance that the gap would not fill during that session, and would likely close in the direction of the gap. Thank you for posting this here. Best Wishes, Thales

Hi enoch, You're still in so long as you post screen captures of your last two statements and PM me your closing equity by 12 noon EDT Sunday. I will be posting the Week One summary tomorrow after we get home from church, unless you get your stuff in sooner. I have the data from the other seven participants, and you are the last hold out for the week. If you do not post by then, you will be out of the official tally. You can rejoin whenever you wish, but you will be starting from the starting line by doing so. If you decide you do want to stay in, you must post screen captures of your statements every morning like the rest of us. I will allow some excessive slippage this week as it was the inaugural week and it is a new addition to our routines, but going forward, we must all abide by the same standard. Sounds fair enough, right? Best Wishes, Thales

Everything is based on the 5 minute chart. Don't get too wrapped up in time frames and bars. I really do not pay much attention to such things typically, but if you are going to use a mechanical system based upon mathematical derivatives of price, bars offer as easy a way to quantify actionable points as any. Best Wishes, Thales

Absolutely, sicko. Having a plan, trading the plan, and sticking with it so long as it is sound is all part of, well, my plan. Part of my plan is to refuel if I blow my initial base. I have already drawn out another $1500 from my InteractiveB account to seed a new stake for The Race if necessary, and it is sitting in a checking account ready to be wired in if necessary. I figure if I can get past 5K, my risk of blow out will drop to nil, and I will then use the $1500 for an extra week of vacation this summer with the family. Nothing has been left unplanned. Here is my statement for Friday - as you can see, no trades (This time of year, I start to take a lot of Fridays off). And now a chart showing the ShouldaWouldaCoulda. Like Monday of this week, which I also failed to capitalize on, the system I cobbled together had a pretty good day on the ES. This is not surprising, as the system I put together is basically two sets of moving averages, and thus, this type of system will excel on a trend day, keep you close to even or slightly positive on a range testing day, and chop you to death on a range contraction day. The system I cobbled together uses one set of MA's to define the trend. If those MA's are aligned in a downtrend, then I only take short signals, and vice versa for longs. I use another set of MA's to provide the signal. The signal is a 5 minute bar close below each of the MA's in the signal set. Got it? Two sets of MA's, the first defines trend, which determines which signals I take. The second set provides the actual signal, defined as a five minute bar close below each of the MA's in the second set. For example, there actually was one long signal yesterday. Had I been trading, that signal would simply have been ignored like it never even happened, because from bell to bell the trend set was aligned in a downtrend. There is no special magic to the MA's I am using. Anyone of you could put something like this together over a weekend or two. At any rate, this thread needs some dressing up, so I thought I'd share my ES chart with the MA's removed - the yellow line is the 9:30 AM EDT US open. There is on every trade a "signal bar" which tells me to place a stop entry order one tick below the signal bar low for shorts, vice versa for longs. The trigger bar is the bar that caused the stop entry to be filled. For the ES, I the plan is to trail a stop, and either taking a stop out or limiting out at +30 ticks. ] Best Wishes, Thales

You are obviously much smarter than I, as I confess that I am unable to wrap my head around what is meant by a "square curve." The best answer I can give at this point is that I have always used a fixed % equity for position sizing, and have not turned 1K into 1 million in 20 weeks doing so. So, I am looking at the problem from the most elemenatry and child-like view: If I am going to make 1K grow to 1,000,000, I only need to double my bank roll 10 times. Sounds easy, right? I know it is not going to be that easy, but we Pikers have to start some where if we are to climb the Pike's Peak of Pikerdom. I'm all ears, and that is what this thread is for, so if you have ideas, please share them. Feel free to use charts, graphs, equations, etc. and so, but please do share. Also, in the initial post I made a remark concerning the risk of ruin. I would encourage others (blowfish, kiwi) to share their knowledge about these matters with us. I did not mean to silence any such discussion. I just want to avoid the usual crankiness that thread such as this tend to elicit at venues such as ET. Best Wishes, Thales

No problem, Brownie. I was just making what I thought a somewhat funny joke about the Browns (obviously directed to you), and it was not intended to egg you into joining us this time around. I respect anyone's decision to join or not join in this edition of The Race, including yours. I'm happy just to have you along as our guardian moderator. Have a great weekend. Best Wishes, Thales

I think we are very much on the same page. I need 120 ticks to double. Average time to 120 ticks based upon back tests should be less than two weeks (based on trading every day - I will be out much of May, and after Monday, my trading will be somewhat spotty for several weeks). I think I know how you plan to get to a million. Whether I can execute that plan remains to be seen. Theoretically (famous last word) this is possible. There are potential problems everywhere. Also, as size increases, ticks to double from previous levels should decrease, as it is possible to add size between levels. For example, if from 1500 to 3000 require 120 ticks net of commish and fees with one contract, one would assume that one also needs 120 ticks net of commish and fees trading two contracts to move from 3000 to 6000. However, at 60 ticks, equity will be 4500, so a third contract will be added, this will mean 6000 is reached after an additional 40 ticks net, so while it will take 120 ticks to move from level 1 to level 2, it will take 100 ticks to move form level 2 to level 3. From level three (6000) to level 4 (12000) will require 95 ticks. This assumes perfect progression and perfect addition of contracts at $1500 increments. Of course, the equity curve will not be perfect, and thus, I assume that each double will require between 100-120 ticks net of commish and fees. This is proving to be an extremely enjoyable game, sicktrader. Best Wishes, Thales

Or, rather, poor money management leads to their destruction. I agree completely. And money management, albeit a far more aggressive MM than is usually advocated among traders, will be key to succeeding at reaching the million. This is why I posted that article about Dahlman. There are some real nuggets in there that I think offer hints that may help us along the way. For example, the author tells us that If Dahlman does not look like a gambler, he does not bet like a gambler either. At least not like any gambler I've seen in action, most of them, admittedly, losers. In the two days I watched him bet, he never put serious money on a horse with long odds. Not once did I get the vicarious thrill of seeing him hit a 20-to-1 shot or collect on a $500, $200 or even $50 exacta. He is a plodder. This reminds me of advice Linda Raschke once gave in an interview in "Inside Advantage," a defunct newsletter published by Murray Ruggiero in the '90's: You can start out trading a $4000 account trading a 1 lot ... but you don't position trade .... you should be in there [and day trade] and try to grab $200 a trade until you can build up ...there is no reason you couldn't average $1000/week trading a one lot ... throw all the percentage crap out the window ... it is much more important to say I was able to make $2000 a month [than I made 300% on my margin] ... if you are making $20000-$25000 [per year] off of a one lot, that is fabulous. That is what I try to do My plan, as far as adding contracts, is similar to yours, though not quite as agressive (I plan on adding every $1500 as compared to your $1300. Like you, I will finish each week trading the same number of lots with which I started the week, regardless of any equity increase that would allow adding size. As Rashcke suggests, I want to get in there and grab what I can each day per contract on average and over time, taking into account the inevitable losing streaks. Elsewhere, Raschke herself advocates not more frequent trading, but rather adding size to your established "set-ups" as your capital increases. Essentially, what we are trying to do in this thread is accelerate the equity curve through aggressive (though somehow sound) money management. In other words, though we are accelerating a positive equity curve, we do not want to do so by relying on the "Hail Mary" pass, but rather through a strong running and passing game played as a hurry up offense. This is why we will likely not be able to get any Browns fans to participate in The Race (nudge nudge wink wink). I also cut the million mile march into much smaller increments. I have small segments or mile markers along the way. They are not really goals so much as gauges telling me whether or not I am on track. For example, my first marker was at the $615 profit level. I hit that this week. I may fall below it on Monday, for all I know. But, within my plan, it is a marker telling me where I am on the course and how I'm doing. My next marker is at an additional $861 profit. I am a few dollars into that piece. So far this has been a fun project for me, and hope each of us gets to stand together at the finish line. Best Wishes, Thales

Hi Folks, Here is an updated list of Racers along with their respective posted starting stake. If I have missed anyone, let me know. Also, all Racers should try to get his or her Friday statement posted by Sunday morning. I would like to post the the week ending summary before Sunday's Tokyo open. Furthermore, rather than taking a chance that I miss one of your posts, please PM me your week-ending equity so I can more easily and quickly put the summary together and get that posted to the thread. yeaheah $ 137.80 fxThunder $ 453.43 sicktrader $ 941.31 thalestrader $1537.75 daedalus $1653.85 enoch benjamin $2036.36 ADarkerRattlingMe $2196.80 bathrobe $2542.38 Best Wishes, Thales

As mentioned in the "Let's Trade" thread that prompted The Race, in order to be included in the trip, a Racer must participate for a minimum of ten weeks, unless he or she shows a statement of a legitimately blown account. For example, if you start with 3K today, and you blow $2600 on Monday and thus you fall below your broker's minimum margin requirements, you have earned your seat at the party table. While there is no requirement that one trades every day, week, or even month, one must still show that one was making a legitimate attempt to accomplish the goal of the contest and must participate in the life of the thread. At the conclusion of the contest, those who participated will decide together who exhibited a proper effort and who was simply trying to get a free ticket to the ball hoping to dance with sicktrader. Best Wishes, Thales

I'm a piker. Piker-in-Chief of the International Brotherhood of Pikers, as a matter of fact. And if I may offer my opinion (the opinion of a piker, so take it for what it's worth), I find it interesting in a thread devoted to growing a sub-piker account to a million large, that an article about one of the greatest professional gamblers alive today goes unremarked, but we do find a page devoted to account statement fonts and what constitutes too cheap or too dear commissions. But, as these issues must have some merit, let's have at it and be done with it so we can focus on the task at hand. Let this piker go on record as stating that I really like Transact's statements. I honestly would not want them to change anything. I can print them without using $80 worth ink, and I can see exactly what was done and how it shook out at a glance, etc. and so on. I like my statements like I like my charts - clean and crisp in black and white. If I wanted a Hallmark card ... Let this piker also go on record as stating that one will never make a million worrying about commissions rather than focusing on a plan that gives you a sharp edge capable of cutting through the seemingly insurmountable. While I never ran piker dough to a million, I did manage to run 3K to 100K and then back down to 2K all in about three months soon after I opened my first futures account back in the 90's. And back then I was paying $50 r/t (plus fees!) to Lind-Waldock the whole way up and the whole way down. Of course, I was not day trading. But the point is this: Even at $50 r/t, the commissions didn't keep me from being wildly profitable, and the commissions did not cause my wild blow up (it was my recklessness that led both to the wild profits and the wild destruction). And consider - does anyone here have any idea the commissions paid as a percent of capital by Livermore, Wyckoff, and Loeb? Typically commissions were about 3%- 5% of capital (1.5%-2.5% in and 1.5%-2.5% out); and back then, we of the piker guild paid even more dear than that! But that did not prevent these men from amassing (and in at least one case, losing) great fortunes. By contrast, in my little piker account, commissions and fees were just 5% of my profits, and if measured against the notional value of my positions, commissions and fees barely register at all! So let's keep our eye on the prize folks - if you are in The Race, you should be focused on sticking to your plan to get from four figures (or less) to seven figures. If you do not have a plan, you should be working on developing one. If you have a plan that will take from your little 1K to 1,000,000, it will take you there whether you are paying Interactive Brokers bundle rate or the higher commissions charged by the low day trade margin FCM's and IB's. macdfx is right. If you are in The Race, you are, at least with respect to the qualifying account, a Piker. Be proud to be a piker in this race. TL has 43, 254 registered "traders," and only 8 have bellied up to the bar to participate. You each ought to be proud to be called a piker. We are here trying publicly to do what all pikers everywhere and at all times have always dreamed of doing. Even the self-professed "pros" don't have the sand to join in - sure, we see them lurking, and lurking repeatedly, but will they join us and compete against us, bringing to bear there superior data mining, intelligent predicting algorithms, and the added edge of paying pennies to our dollars in transactions costs? Of course not - because just about every flippin' one of them is a fraud, a phony, and a fake who will tell you they won't compete because they already "know" it can't be done. Well, folks, as James Baldwin said, "those who say it can't be done are usually interrupted by others doing it." Let's keep on interrupting them, shall we? The Few. The Proud. The Pikers. Best Wishes, Thales the Piker Proud Member of the International Brotherhood of Pikers Since 1986

It was of no importance whatsoever. I had drawn it to illustrate a point to someone else and I just never followed through and made the point. I rarely draw such trend lines myself. Best Wishes, Thales

Trend lines are meant to be broken. I was actually going to make a point about how to draw trend lines according to Trader Vic but I got caught up in other things and never got back to it. I do not find trend lines to be particularly valuable. I have a friend who considers them a potential edge. I prefer trading according to highs and lows. Best Wishes, Thales

Hi Folks, Two trades yesterday, both on the 6E. The first was a long that was quickly stopped for a -12 tick loss. The second was a short that signaled very soon after the long was stopped (if you look at the time stamps, less than 10 minutes separated the long entry from the short exit), and that short resulted in a +30 tick profit. Afterward, the 6E went into whipsaw mode, as it presented four signals, two long and two short, but none of them triggered. The ES was already long on the 24 hour data when I logged in, and RTH data gapped open higher, and never pulled back enough to signal a fresh long entry. Best Wishes, Thales

Hi Hunter, I really wouldn't know who to recommend for forex. I used to recommend FXCM Micro, but when FXCM increased the spreads a few months ago it disqualified itself as a worthwhile bookie. As far as futures, it seems as though many here trade either at Transact Futures directly, or with an introducing broker that clears through Transact. Sicktrader I see trades through Global Futures and clears through RCG. I have never traded with Global myself, but I have several friends who have sand box accounts at Global, and have had no problems. Global claims it has a $0 minimum account size for futures. This is not a recommendation. I am simply giving you a name for you to investigate yourself. Perhaps some others will provide you some other names for you to contact. Best Wishes, Thales

Hi Folks, Here is an article about a very successful gambler which I posted in the Reading Charts thread back in November of last year. If you trade, you should be able to see its relevance to the markets. I think it may be of interest, and perhaps even useful, to our fellow racers, so I post it again here below. _________________________________________________________________ June 3, 2001 The Wizard of Odds By William Grimes Like many people, Ernie Dahlman shows up at the office around 8:45, switches on his computer and spends the rest of the day making telephone calls. His office is nondescript, and so is he: blandly handsome, of average height, with an open, friendly expression and rimless glasses that give him a mildly intellectual look. He could be a travel agent, or a stockbroker, or perhaps a real-estate agent. Actually he is one of the biggest horseplayers in the United States. Just how big is anyone's guess. In a busy year, Dahlman might bet as much as $18 million. Mostly he's concerned with races at tracks in New York and California, and he doesn't shy away from the big races. (He took a bath at the Kentucky Derby when Point Given failed, but he figures the horse, which rebounded to win the Preakness, looks good for the Belmont.) Dahlman bets so much money, in fact, that he has to avoid smaller tracks and certain kinds of bets because, in essence, he would be betting against himself. The Suncoast Hotel and Casino, on the outskirts of Las Vegas, provides Dahlman with an office, and at this moment that's where he is, bearing down hard on the fifth race at Aqueduct. A bank of four television monitors show the action from both coasts, and his desktop computer flashes the probable payoffs on exacta bets, Dahlman's bread and butter. To cash, he must pick the first- and second-place horses in the race, in the exact order (hence the name). It's a high-risk, high-reward bet compared with win-place-or-show wagering. It pays for Dahlman's silver Corvette and his big house with a swimming pool in a gated community near the casino. ''I'm going to put a big box on the five, and do a little bit on the four, because it's a claim by Scott Lake,'' he says, quickly adding a column of figures with a pencil. The five is Top Bunk, a horse in sharp form that is stepping up in class from slightly softer competition and is the main threat to the horse Dahlman is keen on, Borntoberegal, which, as it happens, he owns a piece of. A box is a kind of hedge. It's two bets in one (and twice as expensive as a straight exacta), and it lets Dahlman have things both ways. If his horse gets beat by Top Bunk, he still wins, although his net profit will be much less, of course, than if he took the risk of putting all his money on Borntoberegal in the win spot. And Dahlman is not through. Scott Lake, a very successful trainer from Maryland, has been running horses in New York, at this point without much success. Hemisphere Dancer, which he recently ''claimed,'' or bought out of a claiming race, in which all the horses are for sale, does not look like much. But horses in Lake's hands have been known to experience a religious conversion, and Dahlman does not want to get burned when Lake's horses start firing. (Sure enough, Lake's horses have been winning at a phenomenal rate in recent months.) After placing a $2,400 exacta, Borntoberegal on top of Top Bunk, and a $2,000 exacta the other way around, he constructs a series of defensive bets: a $600 exacta, Borntoberegal over the four horse, Hemisphere Dancer; a $600 exacta, Top Bunk over Hemisphere Dancer; and two $200 exactas, Hemisphere Dancer over those two. Then he watches the race. Borntoberegal breaks alertly from the gate, sets reasonable fractions and pours it on in the stretch. Top Bunk chases in second. Hemisphere Dancer flattens out in the stretch and finishes sixth. The exacta pays $12, and Dahlman collects $14,000 on a $6,000 bet. It nets him roughly $8,000. If Dahlman does not look like a gambler, he does not bet like a gambler either. At least not like any gambler I've seen in action, most of them, admittedly, losers. In the two days I watched him bet, he never put serious money on a horse with long odds. Not once did I get the vicarious thrill of seeing him hit a 20-to-1 shot or collect on a $500, $200 or even $50 exacta. He is a plodder. And he talks like one too. ''Winter is is my favorite time of year,'' he said cheerfully. ''It's more predictable. The horses tend to be older, and you know what they're going to do. And out in Northern California it rains, and you get a lot of grass races switched to the main track, resulting in complete mismatches.'' Most horseplayers love a contentious 12-horse race with the promise of three-figure exactas and monster trifectas. Not Dahlman. ''Anyone who knows anything about gambling will tell you I'm not a great gambler,'' he says. ''What I'm good at is arithmetic. I can add and subtract.'' That's the truth, although not the whole truth. Dalhman is in the business of spotting opportunities and minimizing risk. He resembles nothing so much as an arbitrager or commodities trader, only his market is the racetrack and his commodity is Thoroughbreds. His workday is a series of 20-minute market analyses punctuated by 90-second races that yield, when the penciled calculations and racing luck harmonize, a steady profit. At this point in his career -- he's 58 and has been betting seriously since his teens -- he has amassed the kind of bankroll that allows him to bet very conservatively and still live very well. He compares himself to the early and late Muhammad Ali. In his younger days, Dahlman spent 20 hours a day studying and playing the races, shooting for the moon and hitting phenomenal payoffs. Now, he says, he favors the rope-a-dope approach. Every horseplayer can tell tales of woe. Some of them make you laugh. Read the comment lines in The Daily Racing Form next to the running line for a horse's past races, and you'll get an idea of the strange things that can happen when animals with a brain the size of a prune run at 40 miles per hour around an oval track. My favorites include ''stomped duffel bag near line,'' ''savaged foe'' and ''scattered geese on backstretch.'' I've seen horses round the far turn and head straight for a parking lot. I held a ticket on a 60-to-1 horse at Belmont that was ahead by seven lengths in midstretch when suddenly, for no reason, it ran right into the rail and sent its jockey sailing into the infield. The point is, there's no such thing as a sure thing. Favorites win only a third of the time, an immutable racing statistic. Even successful bettors tear up more tickets than they cash. The trick is to cash enough tickets, at the right odds, to offset the losses and turn a profit. That's where addition and subtraction come in. Of course, the addition and subtraction mean nothing without good information and a refined ability to size up a race and assign probabilities to various outcomes -- the arcane exercise known as handicapping. Dahlman thrives on information. He excels at analyzing a race based on that information, enriched by a lifetime of watching races. It's an art with just enough science to it to make it possible for a very tiny percentage of bettors to take money away from the herd of less intelligent, or less disciplined, bettors. ''I call him the logic doctor,'' says Chip Taylor, a buddy of Dahlman's and a songwriter whose credits include ''Wild Thing'' and ''Angel of the Morning.'' Taylor dropped out of the music scene for years to bet on the horses, often with Dahlman. ''I was good at analyzing pace and bias'' -- the tendency of a racetrack to develop fast or slow areas -- but Ernie picked up on all sorts of things, like when a horse changed from one trainer to another, whether that was a plus or minus, and the answer was not always what you might think.'' Dahlman puts it a little differently. ''I'm a MOTO player,'' he says. ''Master of the Obvious. It's just that more things are obvious to me than to most people.'' Like many other professional horseplayers, Dahlman relies in part on the work of others. The Daily Racing Form gives him a compressed description of the last dozen races run by each horse entered in a race. That merits a quick glance. The more serious numbers come from ''the sheets.'' Published by a professional horseplayer and Marxist named Len Ragozin, they go a long way toward solving an age-old handicapping problem. By analyzing and quantifying a variety of factors, ranging from track resiliency to wind direction to the distance actually traveled by each horse, they assign a speed rating to a horse's performance. The Ragozin sheets are shipped to Dahlman every day, overnight, and one of his rare visits to the casino floor is his daily walk past the sports-betting operation on the main floor to a little office that holds his packet of sheets. The raw speed numbers Dahlman accepts as highly accurate. Other assumptions in the sheets he rejects, like Ragozin's opinions about which horses are likely to regress, or bounce, after turning in a stellar performance. Dahlman also pays close attention to pace, or the time for each quarter mile of a race, which he jots down in one of two fat, spiral-bound notebooks. The other is devoted to his overriding preoccupation, horseshoes. Years ago, Dahlman began noticing something funny about horses equipped with mud calks, cleats that some trainers use for extra traction when rain turns dirt into mud. Dahlman noted that even when rain failed to materialize, a lot of horses seemed to improve several lengths when wearing mud calks for the first time. He began keeping detailed records, and he now considers it his biggest edge. It's the reason he loves Golden Gate Fields, near San Francisco. It rains a lot there, so plenty of mediocre-seeming horses are switching to mud calks for the first time and then sneaking into exactas at good prices. A second reason for loving Golden Gate is that the track posts very detailed shoe information before each race. Not all mud shoes are created equal, in Dahlman's view. Mud nails, which turn shoes into a kind of hobnailed boot, make no difference, in his opinion. But jar calks, which have a kind of high heel, do. The New York tracks do not provide detailed shoe information, so 10 minutes before every race, the phone in Dahlman's office rings. It's a man named Gene (Dahlman professes not to know his last name), a sharp-eyed informant in New York who stands by the paddock with a pair of binoculars and relays shoe information to Dahlman. ''No one,'' says Chip Taylor, ''has made as much money off shoes as Ernie has.'' So why doesn't everyone do the same thing? Because in the handicapping game, not everyone believes the same things. Len Ragozin swears by the bounce. Many handicappers look feverishly for signs of a developing bias. Steven Crist, the editor and publisher of The Daily Racing Form and a big bettor, says that biases are greatly overrated. And so on and so on. Every successful horseplayer has his idiosyncrasies. Dahlman's is horseshoes. And if he's beating the game, who's going to tell him he's wrong? Dahlman grew up in Patchogue, Long Island, where his father, Ernest Sr., owned a delicatessen and spent his free nights betting the trotters at Roosevelt Raceway. Ernest Jr. tagged along. In time he became fascinated by the challenge of finding patterns in the seemingly random circulation of horses around the track. Poring over old programs in his basement, he set about cracking the code. By the end of high school, Dahlman was hooked. He made a halfhearted attempt at college, enrolling in Alfred University with the object of becoming a ceramics engineer. ''It wasn't until I was 40 that I finally found out what a ceramics engineer actually is,'' he says. He shambled along, then transferred to Wagner College on Staten Island. He dropped out of the economics program when he realized he would eventually have to write a term paper. His education at the harness tracks was going great, however. In 1964, the summer after he dropped out of Wagner, Dahlman created a stir when he hit a complicated bet at Yonkers Raceway called the twin double -- two linked daily doubles, or four races -- and earned a record payout for the track of $171,084.60. The local press went wild over the whiz kid with the glasses. Dahlman went right back to the racetrack and hit the twin double the next night. ''Twin Double Winner Does It Again!'' shrieked the headline in The Daily News. This time, the national press jumped on the story. Time magazine featured Dahlman in its college-life section, headlining the story ''Success on the Oval Campus.'' The New York Post hired him as its harness handicapper for $50 a week. The world lost a ceramics engineer. ''I didn't want to be a horseplayer,'' Dahlman says. ''I know my mother was upset. But I kept making money at it. It's a ridiculous choice of occupation that's worked -- so far.'' In the early 1980's, with harness racing in steep decline, Dahlman shifted his action to the Thoroughbred tracks, where he had to learn a brand-new game, one with many more variables. ''It's the difference between checkers and chess,'' he says. Sometimes he won, sometimes he lost. But mostly he won. Even more surprisingly, in a profession populated by misfits, losers and borderline sociopaths, he managed to live a normal suburban life. He married twice and reared six children, none of them gamblers. He also diversified his portfolio, so to speak. Dahlman and Eugene Hauman, a childhood friend, started buying and running trotters in the 1960's and 1970's. In the early 1990's, they turned to Thoroughbreds, and in 1993 the two men became the leading owners on the New York Racing Association circuit, winning 55 races. Today, the two men own dozens of horses in partnership with Barry K. Schwartz, the chairman and chief executive officer of Calvin Klein Inc. Dahlman's daughter Jennifer Gurney manages Schwartz's 800-acre horse farm in Westchester. He pays taxes like any self-employed businessman, declaring income (winning bets) and writing off losses (losing bets). He bets somewhere between $10 million and $18 million a year. His actual income depends on racing luck. He has had losing years. But on average, he says, he earns 3 or 4 percent on his investment. In a good year, that would give him a pretax income of about $700,000. That does not include income from the horses he owns. Dahlman lived on Long Island until the mid-90's, when New York State racing authorities dealt him (and other big horseplayers) a stunning blow. They raised the takeout on exacta bets from 17 percent to 20 percent. Takeout is the amount that a track skims off the top of a betting pool to finance its operations. It's the hurdle that bettors must clear before they can earn a profit. The 3 percent increase represented at least $300,000 a year to Dahlman, who did his betting at a teletheater in Happauge. Dahlman did a little adding and subtracting, then took his money and moved to Las Vegas, where the casinos were famous for striking agreeable deals with big bettors. Dahlman settled in at the Sands. After the Sands was demolished, he switched to the Suncoast, a casino that caters to locals. His arrival was, to put it mildly, unheralded. One day, when the casino was offering free pastries to customers who signed up for a handicapping contest, Dahlman drifted over and asked if he might have a doughnut, even though he wasn't interested in the contest. No dice. Ernie Dahlman, as high a roller as walks into the casino, could not score a 50-cent freebie. As it happens, Dahlman was mired in a slump during the two days I spent with him at the Suncoast. Consequently, he was betting light, about $40,000 a day. He lost about $7,000 the first day I watched him, and the second was no better. There were some tough beats. Rocking Ruby, in the ninth at Aqueduct the second day, got stuck behind tiring horses, had to switch paths and by less than a length missed cracking the exacta at odds of 5 to 1. Another of Dahlman's picks was disqualified from a winning exacta after bumping a rival just steps from the finish line. Most bettors would be chewing the carpet or throwing heavy objects at the television screen. Dahlman reacts to victory and defeat with Spock-like equanimity. Occasionally he will worry out loud. ''I'd like to see the five horse closer up,'' he might say. Or, ''Uh-oh, I'm gonna get beat.'' After the disqualification, he clenched a fist, glared at the screen and said softly, ''Gosh DARN it.'' Then it was on to the next race. ''If I keep my losses at $7,000, I can sleep easily,'' Dahlman says. ''I can get that back in one race.'' The playing field is constantly changing, though. An unidentified man betting through an off-track location in North Dakota uses a computer program that searches betting pools for anomalies, then places hundreds of bets on as many as seven horses in a race in a matter of seconds. The ''professor,'' as Dahlman calls him, places huge bets -- including $215,000 on Monarchos to win the Florida Derby -- and as far as anyone can tell, makes money (as he did on that race with Monarchos). ''This guy is good,'' Dahlman says. ''Fortunately he does not seem to bet at the same tracks I do.'' A few days after leaving Las Vegas, I called Dahlman to see if he was faring any better. ''I'm on fire,'' he said. He sounded almost apologetic about hitting the Pick Six at Aqueduct, a bet in which players must call the winners of six consecutive races. Dahlman put together a $1,000 ticket and, because the pot had swollen after no one hit the jackpot two days in a row, earned $26,000. More important, his day-in, day-out exactas were coming in. Life was back to normal. His life, anyway. After watching Dahlman in action, I decided to apply his methods. Like many small-time bettors, I sneer at short prices, scoff at exactas paying less than $50 and never bet on a favorite. But I've been having doubts. Why not try to do it the Ernie way? I plunked down $35 at the one Manhattan newsstand that sells the Ragozin sheets and set about deciphering the numbers for Aqueduct. The next day, I showed up at the Winner's Circle, a teletheater in Manhattan's garment district, carrying the astronomical sum of $1,000 provided by my naïve employers, five times the maximum I would bet with my own money. Just carrying the cash made me nervous. What followed was a date that will live in infamy. To test the waters, I organized a bet in the second race focusing on a horse, Supernal, that had scored a good sheets number in its last race, when it had raced very wide and rallied mildly for third place. I bet a $50 box using Supernal and Romantic Novel, a horse that had finished second in its last three races. As a defensive measure, I bet a $20 exacta of Miss Mickey, a horse recently transferred to the trainer James Jerkens -- and, I failed to note, wearing mud calks for the first time -- over Supernal. I also did a $10 box, Miss Mickey and Romantic Novel. Miss Mickey, the favorite at 6 to 5, broke quickly and never looked back. Supernal, at odds of about 5 to 1, closed with painful slowness to get the place spot, and Romantic Novel, as the chart for the race put it, ''posed no threat.'' The exacta paid $18. My $20 saver gave me $180, a $30 profit on a bet of $150. I could live with that. It was downhill from there. Near misses, wild long shots and strange tactical decisions by a few jockeys played havoc with my conservative betting strategy. Wicklow Warrior, which looked as if it could crush the competition in the fifth race, was rushed to the front and contested a hot pace, for no reason that I could see. It tired and finished next to last, taking my $220 with it. I picked a nice-priced winner in the next race, Worthy Crane, but failed to match it up with the right horse in the No. 2 slot. The exacta paid $89 for a $2 bet. I collected zilch on $250 in bets. I discovered several things very quickly. First, adding and subtracting two minutes before a race is no small skill. I could not do it fast enough to construct a logical hedge. Second, big bets rattle me. When several hundred dollars go down the drain, I start flailing and stabbing, desperate to pull even. By the ninth and final race, I was down to about $10. The money had disappeared faster than butter hitting a hot frying pan. Third, the Dahlman method is not a method, like counting cards at blackjack. It's a lifetime of racing knowledge. And I'm too old to learn. There was some consolation. I called Dahlman to describe the debacle. He cheerfully told me that he had lost $30,000 the same day. He could afford to laugh. He's well ahead for the year. ''The first two races today,'' he said, ''I lost $12,500, and I thought: What am I doing? Nothing is going right; why am I here?'' Then he hit a $213 exacta at Keeneland in Kentucky that erased the deficit in the blink of an eye. ''The winner was 18 to 1,'' he said. ''When that happened, I said to myself: 'Yeah, I'm in the right place. I belong here.'''

Hi Luker, If I am reading your statement correctly (and I am not sure that I am) you have a current equity of $5238.59. You are on a nice run from 3K in just a month. Good trading! You are welcome to post your progress along with the rest of us, but if you wish to be included in the official field and the weekly reporting, you would need to draw your account back down to $3k or less and start from there. Good luck! Best Wishes, Thales

Good discipline as it protects your capital not only from the market but more importantly from yourself by forcing you to take 24 hours to get your head straight rather than allowing you to revenge trade your way right out of The Race. A $200 loss is much more readily won back than having to go out into the world to scrape together another fresh stake. Thanks for sharing with us. Best Wishes, Thales

The object of The Race is to generate 1,000,000 in profits. Therefore, when calculating my progress toward the goal, I do not include my initial stake, only the profits/losses generated from trading that stake. So, of the total equity shown in the statement, only Tuesday's net profits (+212.10) and Wednesday's net profits (+243) count toward the $1,000,000 goal. Best Wishes, Thales