A Story Of Who I Am And How I Got Here
Over the past 35 years I have been trading the markets on behalf of high net worth individuals.
Merrill Lynch, EF Hutton, Drexel Burnham, and Oppenheimer & Co. all wanted a piece of me.
I was flying high. Even a fund controlled by Goldman Sachs hired my services.
All because of a counter intuitive trading strategy that required nothing but a price chart in front of me
Here’s what happened – brace yourself because it is a rather embarrassing and humiliating story and my wife begged me not to tell it…
The sweat was dripping from my sagged head.
It was a Tuesday and I was listening in disbelief to a reporter from the Wall Street Journal.
I was a high flyer. I just took my first company public. Now I was heading to jail because of insider trading.
How could this happen?
It hit me like a ton of bricks when the reporter continued asking me questions.
“How can you deny it Mr. Shawzin? Your brother testified to your involvement this morning in front of the SEC…”
This was odd. I was just with Gregg (my brother) yesterday at a family meal.
He didn’t say that he was coming to New York, nor did he mention the SEC.
And in a flash it all came racing back to me. I pieced it all together.
It 1990 and I was living in New York. I had just completed a public offering for a Company I had founded a few years ago.
Also at the time, Gregg was the owner of Futures Link, a small commodity firm in Beverly Hills.
I had a trading account there and used it to build my portfolio.
Consequently, I would call in a few times a day to check commodity prices, place orders, and check on my trades.
On one of the calls I made to Gregg’s office he casually told me that an investor group had dropped by his office to get him involved in a ‘good opportunity’.
He didn’t give me any details, yet I could tell he was very excited.
He let me know that he wouldn’t tell me anything more because I’ll just “mess things up”.
Little did I know that it was code for “I’m doing something illegal and you are too much of a straight shooter”.
Naturally, I kept asking Gregg questions about this company, because he wouldn’t shut up about it.
Knowing Gregg’s “control-oriented” personality, and also the fact that he was not very educated, I engaged Gregg in a game of cat and mouse, to see if I could get him to tell him what the stock was without him revealing the name.
So I began asking Gregg some innocuous questions; “what industry was the company in? (He said it was a hotel company), ” where was it listed?” (On the New York Stock Exchange), “what was the price?” ($14.00), “what is the dividend yield” (it was 9%).
It was thrilling.
I felt like a detective. In hindsight it turns out I was just being stupid.
I found two companies that fit the description. Caesars World and Motel 6.
Motel 6 was the only one with a dividend yield of 9%.
I dug a little deeper. I looked at all of their fundamentals, and then I applied my chart analysis to it.
It looked incredible.
This was a rare find. A huge 9% yield in such a reliable and stable company. Everything lined up.
At the time I was involved in an investment partnership with a New York real estate developer, Ezra C.
I met Ezra through an informal relationship playing tennis.
He was very impressed with my track record and the fact that I was trading accounts for high net worth clients on behalf of all these investment banks.
When I showed him my trading style he immediately gave me access to his account.
We were going to split the profits and losses.
Once I finished my analysis of the Motel 6 stock I decided that we should straddle the trade. I had no inside information on the company whatsoever.
It was trading at $15 at the time, and I thought that it could go up to $20.
So we agreed to buy the call option at $17 and sell it at $20. That meant we had no upside beyond $20.
While I was away visiting my father (in Palm Beach), Gregg called my office in New York. I wasn’t there so Ezra picked up the phone.
That introductory conversation between Gregg and Ezra would eventually seal my fate with the SEC.
In their initial conversation, Ezra shared the details of my partnership with him, and the fact that we had purchased options in Motel 6.
From that point forward, and without my knowing, in addition to the trades in Motel 6, Ezra and Gregg colluded on a number of deals, tips and insider trading transactions in many other stocks, without my knowledge.
“I was too much of a straight shooter who would mess everything up” remember?
But to the SEC it appeared like the three of us were joined at the hip and involved in a massive conspiracy and securities fraud.
It was only at an SEC deposition – six years later – that I came to understand the full dimension of Gregg and Ezra’s collusion.
What I did not know (until it was revealed in my SEC disposition), was that Ezra had received a call from Gregg telling him there would be an announcement, the very next day, that Motel 6 would be acquired by the French company Accor.
Based on the information Gregg shared with him, and unbeknownst to me, Ezra bought a “boatload” of call options in Motel 6 …one-day prior to the take-over announcement.
While I had no knowledge of Ezra’s collusion with my brother, nor his purchase of call options in Motel 6 just prior to the takeover announcement, I was a party to the account in which these purchases were made.
To get less jail time, my brother Gregg had to cooperate. The more people he mentioned, the less his jail time became.
Subsequently, when I confronted Gregg as to why he never told me about his appearance before the SEC, and why he lied about my involvement, he claimed a) that he had so many side deals with so many people that he forgot about what he did or did not tell me, and b) he was instructed to give the “maximum” information to the prosecutor in order to evade a jail sentence.
So effectively, my brother Gregg wilfully, maliciously, and with full knowledge gave false testimony to the SEC about my involvement (he even admitted it later in a letter to the SEC… more on that in a bit).
All of the sudden I found myself in a corner.
Nobody would hire me because of an impending SEC investigation.
It didn’t matter what I said. Once you have to start explaining WHY you aren’t a criminal it is all over.
For the ten years from the time the SEC filed charges against me in September, 1992, until the time the case was resolved in 2002, I tried in vain to tell the SEC that Gregg had lied about my “knowledge” and involvement in Motel 6.
(In a June 5, 2002, Gregg sent the SEC a notarized letter confirming that he had lied).
The SEC would not accept this. To them we were brothers. And brothers naturally tell everything to each other.
However, no matter how much they probed and investigated, the SEC could not find a shred of evidence that I was involved in the insider trading.
It didn’t matter.
Because of the lies Gregg told the SEC in his testimony, I eventually had to accept a Consent Decree from the SEC that read, “I neither admit or deny guilt”. Because they knew the testimony against me was “dodgy” at best, the SEC never even fined me.
After 9 years I had to decide whether or not to spend hundreds of thousands of dollars defending myself, or just sign this form and it’ll all be over – without having to pay anything.
Since my son was just born and I had to make him my priority, I decided to sign the form.
The bitter effect of the SEC Consent Decree meant that my reputation and credibility would be scarred for life.
I was effectively “fired” from Wall Street, and all my prior successes were erased.
In 2005 it all changed.
My brother Gregg died of leukemia on June 26th. I couldn’t be mad at him anymore.
It frustrated me.
The man who ruined my life got a fate much MUCH worse than mine.
I HAD to forgive him for what he did. His poor family needed me to and I couldn’t let my niece down.
I have a son of my own and he has changed my perspective on life. He somehow took away all the bitterness.
AND I had to provide for him. I needed to afford all the things we would require in later life.
However, I was running out of money. FAST. Beverly Hills doesn’t come cheap.
So I decided to open a trading account with the last few thousand dollars I had left.
I couldn’t trade for large clients anymore after all.
I was motivated.
I had my trading rules that I’ve been honing in for 20 years on Wall Street and I stuck to them.
It was simple. It was easy.
Forgiving my brother gave me clarity that I haven’t had in years. My son gave me the motivation.
I was spending only 15 to 30 minutes a day in front of my PC (a far cry from trolling the New York Times and calling up for quotes).
I literally played tennis every single day. I got fit and happy.
I used the rest of my savings to keep me and my family afloat.
I traded everything. Stocks, commodities, Forex, and bonds. By being able to flick through multiple charts with the click of the mouse made it easy.
Of course. I didn’t win every trade.
There were times that the account was 10-20% down. However, I think it is safe to say that you know it’s just how investing works.
It is funny.
Little did I know that my brother’s betrayal got me out of the Wall Street 16 hour days.
It got me to spend more time with my Son and my Wife. I was able to play tennis whenever I wanted.
It ‘forced’ me to reach my potential. Who knew that I would be thankful one day for what Greg did.
When the GBP (British pound) fell against the U.S. Dollar (USD) my account exploded.
In one trade my $300,000 went up to $420,000. I took huge advantage of the big swings in the market.
Nipping in and out like a thief. Pulling in big piles of cash.
Another two trades in the Swiss Franc yielded another $40k.
By the end of that year my trading account had ballooned to $1.3 million. I was finally free.
Although my portfolio exploded since 2005, especially during the financial crash, there were some times I took outsized risk.
Over the years this became worryingly normal behavior.
In 2011 I decided to start sharing my trades online and this lack of original focus caught up to me.
Traders from all over the world copied my trades.
I was featured by some of the top forums, blogs, and brokers in the world.
I had regular contact with the CEO of FXCM, I was in talks with the owner of ForexPeaceArmy about doing a joint venture.
I had also raised significant interest from investors all over the world.
I had it all figured out.
I would use a special piece of software to copy all of my Forex trades onto subscriber accounts.
I got daily emails from subscribers second-guessing every move I made.
I had people loving me on the forums and then others who hated me.
I had other competing Forex services spreading false rumors about me.
And all of this led to the demise of my trading psychology.
It all started with a simple trade shorting the EUR. I had just had an argument with someone on the phone about something they wrote about me online.
I rushed out to pick up my son from school.
In all the haste, I didn’t add a stop loss to the trade (a stop loss is a price point at which the trade automatically kicks out).
When I got back from the school run I was horrified.
The trade was down 3% and the EUR kept rising.
I knew I had to exit it, but I just KNEW the forums would go nuts on me.
I stayed in the trade and it made a whopping 8% loss.
I quickly wanted to make it up.
I rushed into 3 more orders and I kept doubling down. Every time the price doesn’t move in my direction, I would enter another one.
I just knew in my bones these trades would turn around.
It was an overnight disaster that I couldn’t recover from. I kept making mistakes. I didn’t sleep.
I had thousands of traders following me. I HAD to turn it around.
However, the market is an unrelenting beast and you can’t tame it.
After all, I was fine on my own.
Why did I have to try and please these people?
The Internet community was harsh, and they didn’t understand investing.
They were all infatuated by ‘EAs’ (trading robots) and $47 ‘internet money making trading products’ that were junk.
They hopped from one system to another.
And I fell into their trap. I wasn’t used to it.
I was used to trading for big institutions and more recently, just myself.
So I went back to it, but this time I vowed to never lose sight of my trading rules again.
They’ve served me well for 30+ years.
I started a trade journal.
Each day I simply recorded every single trade before I took it. I took a screenshot of the trade chart with my simple pattern analysis drawn on it. I write up the precise ENTRY, stop-loss and take profit. I also write down a brief analysis of why I am taking it.
So everyday I would write in my trade journal…
Meticulously analyzing, assessing, and using the same rules investment banks paid me millions for.
In my trade journal I analyze and select only high-probability trades at the end of each trading session. I don’t get sucked in to the intra-day “market action”. I mainly focus on capturing the bigger market moves that extend for days or weeks.
Some days I don’t see any trades that meet my criteria. On those days I just head to the beach or the tennis court.
The set-and-forget concept behind my trade journal has imposed a discipline and clarity on my trading I did not have before I started using it.
And true to its form, my daily journal, and its simple trading rules (I don’t use indicators), are lighting up a storm. At the time of this writing I’ve had a nice 69% uptick in my trading account in just 4 months.
For me my trade journal is the Holy Grail of trading. Less stress. Less worry. Just me in-front of my screen for no more than 60 minutes a day.