Interview with a Trader: Inside the Mind of Dan Mirkin

PapaDaniel Mirkin was born December 22, 1970 in St. Petersburg, Russia. At the age of 8 years old, Dan emigrated to the U.S. and moved to Houston, Texas with his family. Both of his parents came from scientific backgrounds, with his father being a geologist and his mother a mechanical engineer. He also has a sister who is ten years older. Dan is married with three children. Dan’s family has two Rhodesian Ridgebacks, and currently resides in Carlsbad, California.

Being an immigrant child with no knowledge of the English language made difficult for Dan to fit in at school. It was a trial by fire. Kids are pretty brutal at that age. He learned to adapt the hard way. Dan played competitive ice hockey for most of his adolescent years, including through high school. He graduated from Bellaire with the Class of 1989 and proceeded to the University of Texas at Austin.

Philip Smolen (who is the other senior partner and founder, CTO, and architect of the Trade Ideas streaming messaging infrastructure) has been a close friend of Dan’s since 9th grade. They graduated from Bellaire together in 1989, and were freshman roommates at the University of Texas. Phil studied computer science while Dan studied business. In 1992 (their junior year), Dan studied at the London School of Economics. While doing so, Dan was able to witness the 1992 Winter Olympics in Albertville, France, and the last time the his native Soviet Union would compete at the Winter Olympics.

The Interview

Dan took some time to answer some questions for me both about how he got his start, and how Trade Ideas got started:

What first influenced your interest in the stock market?

“Most interesting things in life have more to do with luck and timing than anything else. I joined a fraternity in college called ‘Sigma Alpha Mu.’ There, I met a guy who would become one of my closest friends to this day. His name is Steven Geduld. His influence shaped this whole adventure. Steven and I both had a liking for chasing the ladies around. We saw eye to eye, and quickly became good friends and ‘wingmen.’

After freshman year, Steven invited me to Aventura, Florida to visit him and stay with his parents. Steven always referred to his parents’ home as an apartment. Having lived in an apartment myself when my family arrived in Houston, I sort of always felt a little sad for poor Steven.

So Steve picks me up at the airport in Miami, and we drive to his apartment… the one that is on an island… Williams Island. Needless to say, my perspective on apartments changed very quickly. When I got up to Steven’s apartment, it was this gorgeous 5,000 sq. ft. apartment with decks and panoramic views of the ocean and intercoastal. I made a mental note to myself: I said ‘Daniel, whatever it is you do, ask Mr. Geduld what he does for a living!’

As luck would have it, my best friend’s family owned the largest market making firm on Nasdaq. The firm was Herzog Heine and Geduld. Yes, that Geduld. So I learned on that trip what it was to be a trader, and take risks and make markets. I learned the difference between that and being a broker. I had no idea before, and actually thought that a broker and a trader were the same thing. My relationship with Steven continued to provide unintended benefits. When we graduated in 1994, Steven was going off to NY to be a market maker for his firm, and I still wasn’t sure what I was going to do.

I wasn’t aware of your history as a trader until I did some digging. Impressive. What was your style/niche back then?

Steven’s father, Irwin Geduld, said ‘you should look up SOES bandits.’ He said ‘guys on SOES are making a killing by beating the market makers at their own game.’ That was very interesting to me and appealed to my affinity for taking risk. I jumped head first into the SOES game with Block Trading. Here they are on the cover of Inc Magazine: Bad Boys of Capitalism. I was right in the thick of things.

Block Trading expanded beyond any ability to manage the growth. They also didn’t realize that they had no technological advantage. They were outsourcing all of their IT needs to a small, one office, 3 man shop called ‘Cyber Trader.’ Cyber Trader would build tools for helping the SOES traders see what was going on.

It was 1996, and I was an office connected to a T1 line. I had faster internet than you and I are using right now. We were watching the futures, the bonds, and the stocks follow. We had level 2 windows before they became useless. People who watch level 2 windows today simply did not grow up to understand that they are currently in a meaningless mode. All orders can be gamed today… meaning that no fund in their right mind is going to put a real offer out for people to see. That would be insane and against the fund rules. They specifically do all sorts of crazy dances called ‘time slice’ and ‘twap’ to hide intension. But, back in the day, the market makers really weren’t that savvy and aware of who was watching. The interactions between the SOES and Select-Net network literally gave retail investors a competitive advantage over market makers. It was a time to behold and a time of rapid innovation. Interestingly Austin was a hotbed for SOES trading.

Very nice. So what inspired you to get into the software business?

Back on the topic of Block Trading… The CEO of CyberTrader creates a nice front end, called ‘CyberTrader’ which is a copy of a first generation GUI front end called ‘The Watcher’ which was made by Datek. The original Datek guys were like the Beastie Boys of daytrading. They had the best firm and spun off firms, and were the first to make software. Later, they created the Island ECN and were a huge part of the whole market decimalization. CyberTrader was a great idea because it helped offices like Block Trading have more customers and less employees. It was clear software was the thing that ruled. To make a very long story short. Block Trading goes out of business within a year of the Inc article. CyberTrader creates a broker dealer and starts gaining attention. In 2002, Schwab buys CyberTrader for 500 million dollars. Think on that.

So where does Trade Ideas come in?

By 1998, I was a successful SOES trader making money and people wanted to use my talents. I was hired by expanding SOES offices to be a floor leader. You can have more people sign up to trade at your office if they can see that somebody can do it. I was the ringer. I moved to Irvine, California. I liked the job, and I was good at it. The whole time in California I was looking to raise money to start my own version of CyberTrader. I had traded so much already by that time I had a very good feel for what was needed to make me better.

By 2000, I had articles written about me in several newspapers, including the San Diego Union Tribune. Finally, a team of people I cultivated since arriving in California, raised 4 million in 2000 to start our own software company. We opened two European software development satellite offices utilizing my Russian language skills and cost leverage. Timing is everything. That business got hit with two black swans. First, the dotcom bubble burst, and many people lost very big. They no longer had a stomach for raising capital and investing. Then 9/11/2001 and it got even worse. By the end of 2002, my original core team had seen the writing on the wall. We exited and pivoted directly into Trade Ideas. Our first subscribing customer was in January of 2003.”

What made you branch out to create an artificial intelligence software?

“We created Trade Ideas because I believe I was at the right place at the right time to have gotten the skills that I possess. I think it is almost impossible for people today who enter the market to have that type of feel. So how can we bypass that feel? I wanted to create technology that automated what I did by feel. That is how we started and have been evolving ever since and continue to evolve. There is no finish line.”

What lessons have you learned along the way that you can share with readers?broke

“One of the best lessons I learned in active money management and investing is what can be possible. I have had days in my twenties when I made over 250K, in one day. That was just insanely cool for a kid at that age to experience and feel. I also learned how easy it is to not see the forest through the trees. I traded DELL, INTC, CSCO and MSFT, back and forth all day long and short.

Why? I was trying to get 500 dollars out. That was a huge mistake for me to think like that. It limits you to what you see. I missed the gigantic up move that happened right in front of my face. DELL Computers rose 35,000% from 1996 to 2000. That’s how wealth is made, and I saw it and I understood what stocks were about. Stocks are about wealth hacking. It is one of the few places that you can if you are fortunate, jump the social strata. I have seen it happen and that is what I want to help people try and find.”

What about your software is different from all of the subscription services out there that essentially rip people off?

“Trade Ideas is in a very unique position right now. We are the world’s only consumer facing financial artificial intelligence technology. Our technology cannot be reverse engineered. People can try, of course, but since we don’t even know what the AI is going to do tomorrow, it is a fool’s errand. We are way ahead, because of the story that I told you of how far back our group actually goes. The kind of core industry knowledge that we bring together simply does not exist today.

The biggest tragedy for retail investors is that like the meteor killing the dinosaurs, so did the dot.com bubble and 9/11 destroy most investors. The financial industry jumped at the chance to say it was all because people should not be in the market and leave the market to the experts. You know, the ones that gave you the financial crisis. For most of the last 16 years, people just continue to give their money to other people. The industry has been killing the art of stock picking and instead has herded everyone into the same index. Either through people or Robo-Advisors, it is the same crap in a different package. Index is average at best.”

What’s next for Trade Ideas? Any new developments on the horizon?

“Trade Ideas customers smell what is happening. There is a new technological revolution taking place right now. It is happening faster, and at a scale that no industry really understands or can value. Luckily for us, one of the best places to take advantage of this is in the stock market. Everything in the world happens first in the stock market.

Trade Ideas is at the pinnacle of what you can do with market data. It is so exciting to see where all of this goes. The best part is we are not a start up. We have been there and done that and now it is time for Trade Ideas to win!”

What would you like your “legacy” as a trader to be?

“I want to be one of these people that changes the game in a positive way.

What is the point of terms like ‘day trading, swing trading, and long term investor?’ All that does is put negative images in your mind. We associate ‘day trading’ to the 95% of people who lose their money. The swing traders, well by definition they get out too soon to ride a meaningful trend, and the long termers are just a name for the ‘never sellers.’ I want people to forget all that. The stock market is where we explore. We are wealth hacking. We look for cancer cures, gene editing, muckraking reporting like from Citron that exposes stocks like VRX. We are here to add liquidity, take liquidity, and take advantage of a new type of information age. An age where we forget the stone age tools of technical analysis and engage with modern approaches to big data crunching with artificial intelligence.”

 

I want to personally thank Dan for taking the time to share his thoughts on the above subjects with us, in addition to the dedication and time he has invested in Trade Ideas. It’s a great software that I’m thankful to have the opportunity to use, as I’m sure many of you are.

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Check out my in-depth Trade Ideas Review if you missed it.

If you would like to recommend a well respected and credible trader for TraderMentality to contact regarding an interview, email [email protected] or DM via twitter @tradermentality.

Dan Mirkin

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