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This following excerpt was left out of the book by the publisher.

The reason for this decision was the desire to keep the book strictly on the topic of trading. I publish this omitted excerpt here to offer the reader some colorful background of the book. I hope you enjoy the book and find it useful in your daily quest to become a better trader.
- Vad

CHAPTER ONE: The Early Years in Soviet Union


First attempts to run private business. Learning to live and work in rapidly changing
environment. Mafia rise. Decision to emigrate.

The early 80’s marked a time of political, economic and military unrest in the Soviet Union. Tensions between the east and west continued to build and the Cold War was further fueled by events such as Solidarity conflict in Poland, the downing of Korean Jetliner 007 by the Soviet Air Force and strong rhetoric between the leaders of the two most powerful nuclear nations on earth. President Reagan entered the cold war with new tactics, aggressively outspend and outlast the economic ability of Russia to keep up in the arms race.

The tactic was extremely effective, shaking the very foundation of an already desperate Russian economy and the government began to come apart as economic turmoil set in during the mid 80’s. With new political and economic ideals under the leadership of Mikhail Gorbachev the government began to rebuild and “Perestroika” was born.

Communist ideals were under fire and new issues and discussions, formerly not allowed began to be commonplace. Citizens began to critique the government, the lack of freedom of speech, the absence of other political parties other than Communist. People began also discussing the very hot topic, free enterprise. Free enterprise was a radical thought, because private business was forbidden over the previous 70 years. Any activity that was a sure a road to prison during the previous 70 years was now more or less permitted, even without the country’s full blessing.

My experiences during these times of rapid political and economic changes, as well as the challenges that I faced both in business, personal and cultural, taught me a lifetime of lessons and played a huge role in the how I learned to trade.
The impact of the introduction of free enterprise on society was shocking. Just imagine that for over 70 years, generation after generation was taught that people should not be working for other people. The state was the only legal owner of plants, factories, land and buildings. In the propaganda about capitalism, there was no difference between the entrepreneur and the thief. The transition from communist ideals to free enterprise was very difficult for many. The majority just wouldn’t consider it the right thing to do. Many simply lacked energy, knowledge, and courage. Some were afraid it was a provocative move by the KGB. To some degree this was true, since the KGB kept an eye on brave pioneers, ready to pounce if government superiors reached certain annoyance levels with the economic games being played.It wouldn't be a first time in Soviet history when the period of "thaw"would turn into new "tightening of screw-nuts". Additiohal difficulty was total lack of personal experience with any kind of free entrepreneurship.

As with anything else, while the majority is slow to respond, to have vision, to see opportunity in a sea of chaos, there were those select few of us that were not afraid to try and take advantage of any new situations. Although this seems simple to mostly everyone in the free world, this was a foreign concept to those of us behind the iron curtain of communism.

After a short period, these brave early entrepreneurs began to dive into this newly formed economic system, at first starting in the service industry. This service industry took the form of cleaning services, taxi cabs and small cafes and shops, much like you would see on almost any street in New York City. The first form of free enterprise was given a colorful nickname; "shishkebabers" or shashlychniki in my native tongue. The next step in business development was the professionals who began branching out in other sectors. That was the moment when I felt I could do something to change my life in a dramatic fashion. I was a young 27-year-old construction engineer working as a Chief Technologist at a concrete details manufacturing plant. Working in the industry after my graduation, I developed friendly relationships with many professionals I met. In particular, I became close with designers that could engineer anything from a doghouse to a metallurgical guild. It was natural to pick this field to give an outlet to my energy and desire for activity. I could cook great shish kebab (still can), but I was a well-educated engineer. I wanted to do something more ambitious, so shish kebab skills remained for picnics with family and friends.

I discussed my new business ideas with several of my friends who all enthusiastically jumped onboard. They assured me that a project of any degree of complexity could be done professionally and quickly in their free time. I registered my own enterprise (co-op or cooperative as they were called) and started looking for our first job. I wanted to test the waters with a small and simple project to learn the ropes at first then move to larger projects as I learned. By watching a few failed businesses I learned an easy lesson, don’t start big without the proper knowledge or understanding of the process. Doing so only led to failure.

One day, a fortunate event occurred. One of factories in our city needed some designer job to be done, too small for big state enterprises and relatively cheap to get them interested. We took this job and finished it in two weeks. This was period of time any big state enterprise would have required just to look into an agreement, unlikely to sign it, let alone to start working.

We signed an agreement for 8,500 rubles. Three engineers and I received 2,000 rubles each. My enterprise received 500 in profit. It’s not possible to give dollar equivalent because of artificial rate at that time (there was no currency trading in USSR). To put this into perspective, let me give you an idea what 2,000 rubles meant for me in the late 1980s. My monthly wage was 230 rubles, and I was well paid by Soviet standards. Most of my friends were getting paid 150 -180 rubles a month. You could buy a new car (well, it was a Russian car) for 6,000 – 7,000 rubles. Buying a car in Russia was different than what you might be used to. In order for me to buy a car, I had to pay the full amount at the time of purchase. There were no bank loans, credit cards or mortgage loans, etc. This made buying more expensive things much more difficult. I was finally able to do this. This first pay off was not only nice; it was large in comparison. After this initial success, I got more of a taste for it.

My next challenge was to repeat the process. I needed orders and I directed all my energy to finding them. The whole process was a challenge that I enjoyed and was defining my business character. I liked what transpired and so did my co-workers. I was making them just as happy in this new free enterprise world. It was a great feeling to do right by your own decisions and then let this spill over to those you deal with everyday, making their lives brighter too.

I felt that I found a great niche of unsatisfied demand in smaller construction projects. In just five months, I asked myself why I still worked that day job. I quit the next day. Three months later and I bought my first car without a second thought. This type of financial and personal freedom was unheard of. It was a new state of success and freedom.
My enterprise was working on three to five projects at the same time. I had six teams of designers waiting to exploit the next job. Local plants and factories of our heavily industrialized city quickly became aware of our existence. Success travels fast in all areas of the world. We did our job with unmatched speed and charged less than the state firms did.

As this niche business continued to expand horizontally, I did not want my company to remain limited to a single kind of activity. I wanted to expand vertically. During the next two years my enterprise developed several new directions. I moved into operations that dealt with renovations, transportation and even fascinating projects like the conversion of car engines from gas to liquid propane (the fuel deficit created big demand for this).

Those were early times of the newborn Soviet free economy. Those times were also the first rudiments of the rise of the Mafia in the Soviet Union. It was much later that the black side of the transition to a free market economy soaked in all business (and not only business) circles. At that time it was quite a primitive racket that was interested in cash and cash-based businesses only. Primarily, they were focused on “shish-kebabers”. The logistics of work involving more civilized accounting such as bank transfers, rather than cash exchanges were not attractive for them. Fortunately, my partners and I enjoyed a racket-free work environment, mainly shielded because of our legitimate business practices. Unfortunately as we grew and learned, so did they.

The business landscape was changing constantly and quickly. In just three to four years of new economical developments, an evolutionary situation occurred that the country leaders did not> foresee when they allowed private commercial initiative. Instead of primitive co-ops intended to satisfy simple day-to-day needs, much more complicated structures appeared. Private banks, financial companies and merchandise exchanges were surfacing everywhere like mushrooms. Even the media (a major weapon of communist ideology) got infected with commercials (something quite new for USSR population) and the first private TV and radio channels became a reality. Seeing this change and adjusting to this new environment at the neckbreaking speed taught me a few lessons of how to stay sharp and focused, so as
not to get blind-sided by the unexpected.


During this evolution, new economical phenomena started to blossom; the middleman. The old system of planned supplies could not keep up with new demands. Middlemen were playing on the difference between ”state price-list” and real prices. The company that needed metallurgical products wasn’t able to buy it from the plant producing it, but there always was some private enterprise near that plant that could sell the product for the commercial price. The difference was huge, in some case 300-500%. This kind of scheme created big room for corruption. Why would high executives of the metallurgical plant sell their product to that private enterprise for firm state price without any under-the-table reward? This lure of easy money that was made in a blink of an eye could not go unnoticed by the dark side. Thus, the criminal element moved right in. >From primitive “protection money”, the Mafia element went to more complicated business. Now they had their people in banks, in tax bodies and among customs staff. The Mafia became well informed. The business world became separated by areas of influence. Mafia guys were now patronizing contracts, making sure that all the parties fulfilled their obligations and of course receiving their share of the profit. Businessmen started their negotiations now with the question:

Who is your “roof”?

“Roof” bandits were those that were protecting and patronizing you and your contracts.
Unfortunately, they became a necessary element of the business environment. I wasn’t too
excited for my life in this unstable economy with Mafia as integral part. It looked ugly. Future events showed that the worst was yet to come.

For a while I was able to avoid the middleman business, trying to stay away from the rapidly criminalizing area. Unfortunately the designing business started to shrink. The economic
situation in a collapsing country was getting worse and inflation started to show its ugly head. To give you an idea; In 1988 I bought my car for 6,000 rubles. In 1989 I paid 12,000 for a cute little cottage with a small orchard. In 1990 a VCR cost 26,000, more than I paid for the car and the cottage together!

Big enterprises had no more money to build or renovate, thus the need in design jobs diminished. Not having much choice, I tried to remain as civilized as possible. In order to stay legitimate, we bought a seat on the merchandise exchange. We trained several brokers and commenced supply operations using our good relationships with executives that we were working with for years.

Overall it shaped out pretty well in spite of the fact that many of the partners just wouldn’t fulfill their obligations. There was a popular joke at that time. Two brokers meet. One of them asked another, “Do you need 50 tons of jam?” ‘Yes, sure”. They shook hands and left, one to search for jam and the other to find the money to pay for it.

No matter how hard I tried, I couldn’t escape what was becoming part of everyday business in this environment. I was experiencing some pressure from the Mafia element to use their “protection”, but it was not that bad for a while. Two bosses, Boris and Sasha, patronized the city center where my office and apartment were located. Both were slightly older than I was, soft-spoken, polite, and pleasant.

Boris was quite a philosophical man, often descanting about the positive role of the Mafia in maintaining order in business relationships. His favorite justifications came across as if it weren’t for the Mafia element, we (businessmen) would cheat on each other constantly. Considering the weakness of law enforcement (which was true), no force would make anyone pay for an obtained product, or supply the product after the payment. It sounded logical and I might have even believed it if I didn’t know how often Mafia guys participating in the operations intended to circumvent one of the sides or even both of them.

Sasha dubbed himself with a smirk “The only bandit in the city who graduated from a university”. These two guys ran quite an organization. It was well structured. It had a treasurer, couple hundred of “torpedoes” divided by squads. Torpedoes were the lower layers of performers used as brutal force. You could recognize them easily by their typical uniform including a sports costume, snickers, a gold chain and a buzz cut. Torpedoes would never fail to carry out any order given.


Like I said, it wasn’t too bad for a while. I managed to maintain a rather distant fellowship with them. We opened a supermarket and I asked them to provide guards for 24 hours protection of the premises. On another occasion we asked them to provide an escort for a truck we sent to another city. This kind of thing helped to show just the tip of the iceberg to them for some time.

As time went along, the situation was becoming less and less stable. In 1991, the USSR collapsed and the former Soviet republics became sovereigns. Economic links were disappearing and Inflation developed at galloping speed. You could wake up in the morning to see the exchange rate worsening twice against yesterday's. In addition to this, there was a total lack of structure or civilized way to handle the money turnover. By this I mean there was an absence of electronic plastic cards and a reliable banking system. You had to have your money in cash. People and their apartments became the target of criminal attacks to the scale that no civilized country could imagine. Cases of kidnapping and assassinations by order grew to every day’s reality. The school my kids were attending was located just 10 minutes away, by foot. I couldn’t in my right mind allow them to walk it, even just 10 minutes away. I was sending a car to pick them up. During this time, a conventional saying appeared: “To take someone to the forest".

When bandits wanted to make a businessman do something for them and he got stubborn, they would force him into a car and take him to a remote forest. Several hours of beating and burning the skin with cigarettes would guarantee an absolute agreement. Actually much less time was needed, but the torture continued for a while to make a lesson well learned. There was no slightest sign of stability in sight. Contracts were falling apart because of jumping rates and the unreliability of partners. I was still able to provide quite a decent living for my family but increasingly it looked like a dead end. A few events really were etched in my mind.

There was a store near our supermarket. It had a mix of clothes and electronics. An energetic woman in her 40s ran it. She was getting supplies from another city, paying for them as she sold a certain amount of goods. She was selling for local currency in her store, but paying in American dollars to the supplier. The exchange rate jumped on her in the middle of the cycle leaving her with half of what she owed. After two weeks of unsuccessful negotiations, her store was burnt down. She hurriedly left town saving her life. Another incident occurred with one of the city’s well-known private companies. They announced the creation of a trust that carried the promise of a big interest return, something like 60% annually if I remember correctly. The trust worked for about a year, then disappeared overnight. Angry deposit holders were left to look at an empty building with no record of their money. After a while, rumors surfaced about the trust’s high executives living a nice life somewhere in Western Europe.

A friend of mine who ran a small private bank told me some horror stories that took place in his business. A car that delivered money from another city got attacked in a Hollywood heist fashion. There was a tape with nails across the road, shooters from the ditch, etc. The seemingly endless escalation of the dark side of the new economy brought constant thoughts of emigration, if for nothing else, my family’s safety. Emigration wasn’t as easy as just getting on a flight, nor was the thought of changing my whole way of life easy. I realized that my business skills would be most likely unusable in the Western environment, nor would the language barrier help. In addition, emigration itself was not easy and could take enormous amounts time and effort with an uncertain outcome. Some push from the outside had to occur to make this decision easier for me. Finally in 1994 such push came about.

I had just finished a big contract and all the custom papers had cleared. the money made its way through the banks. I prepared the usual “hide and seek” game with the roof bandits. However, this time, instead of bandits, guess who came in demanding their share?

The militia did. That was the last thing I needed to decide on leaving. I learned to live relatively peaceful (as much as one can) with the bandits. It certainly was not a big pleasure, but if you manage to keep their impact under the lid, it’s bearable. I was able to bear with corrupted police. Again, not a nice situation to be in, but after all, it wasn’t really a big novelty. But how do you live in a situation where they exchange information and work against you, not leaving you any way out?

Maybe someone can. My answer was, I can’t and I don’t want to.

I was 33, with a wife and two kids. I wanted a future for them and for myself and I started opening the back door.

CHAPTER 2: BEGINNER

Start of immigration process. Overcoming the language barrier. Picking a profession. First
trading attempts. First hard loss. The formation of trading mindset.

In 1995, I became one of the organizers of an international trade show where Ukrainian enterprises showed their products in Canada. It took an entire year to finish my part of the project in the Ukraine. In February of 1996, I came to Canada to work on the final part of the project and filed the immigration application as an entrepreneur. A new chapter of my life has started.

The first impulse of many businessmen that immigrate to North America or Western Europe is to do business with their native country. This seems natural, as they know the environment they just left and see themselves as a link between new and former business partners. In reality it’s not that easy to make it work. In everything, as I find out later in trading, it’s not as easy as theory would have it be.

Western business mentality is very different from what I was used to, as are the practices and methods. Besides, doing business with the deteriorating environment I just left was not something I really wanted do. Instead, my inclination was to start a pure western business, with no links to the collapsing Ukrainian economy. This decision was supported by a message that I received in June of 1996. Boris, one of the Mafia bosses I have told about earlier was shot to death. This was one of the signs of the ongoing distribution and redistribution of power and territorial control. I wanted to stay as far away from this endless war as possible.

At the same time there were obstacles in my way to establishing a business in Canada. Obviously, the lack of knowledge about how things worked here was one obstacle. The language barrier was another. Almost every
immigrant has some funny stories to tell about awkward situations caused by his poor language. I have my share also.

I remember trying to buy insulation tape to stop a water leak in the faucet. I went to the store and played charades with young salesman, not knowing the words “tape”, “leak”, and “faucet”. Try saying all this with only your hands and you will know what it feels like!

In business, there is an assumption that communication between people is clear. Don’t laugh, but Al Bundy on “Married With Children” became my first link to the English speaking world. As much as Al was a slob to the American and Canadian society, he was a very convenient teacher. To this day when my manner or tone of language isn’t understood well enough by those I mean to communicate with, I blame Al. I was also watching movies that I saw in Russian translation which helped understand text better.

But my English was still not good enough to learn new business or make realistic contacts to do business. I realized that it was going to take years for my English to improve to such a degree that I would communicate fluently with native English-speakers. I began to think of what kind of business could I run alone, with a minimum of communication, to alleviate the impact of an accent and labored speaking.

The natural idea was that it should be something Internet based. Typing and reading is easier. It left me more room to use the dictionary, compared to immediate person-to-person conversation. It didn’t take me long to understand the concept of Internet and browsing. Armed with an electronic dictionary, I was wandering all over the Internet getting comfortable with searching and reading of web pages. Still, I had no answer to my major question of what was it that I could do for a living. Canada required that I meet business standards, in order to stay. I had to have an office, an employee and pay taxes. There were others but I won’t bore you with them.

Life rarely puts us in a situation with no solutions. When we are ready, then the appropriate door opens. It’s not always easy to see that door as it sometimes appears as an insignificant event. In my case, it was an accidental conversation with the guy who helped me get familiar with the Internet.

Like many others, he was investing his money trying to exploit stock market movements. On one occassion he showed me the chart of some stock he bought several months prior at $11. The stock was now around $18 and he was going to sell it to lock in his profit. Looking at the chart, I noticed that the stock made several moves up and down before it reached its current point. I asked him with curiosity, “Why don’t you sell each of these tops and re-buy each of these bottoms? It looks like you could make 14 points while stock moved just 7?” He replied, “Well, it’s great in theory, he said. In reality you never know when these tops and bottoms occur. You cannot time it right. It’s obvious only when you look at the chart of past events.”

I nodded and returned to what I was doing, but some thoughts about this conversation continued to brew.

The next day I called him and asked, “OK, you can’t time it if you just look at the prices at the end of the day after you finished your day job. But what if you could watch the prices during the day in real time? Would it be possible to see those tops and bottoms as they occur? And is there a tool that allows seeing them in real time? And is it possible to buy and sell right away?” He replied, “Well, if you could sit in front of the computer all day then maybe, but I’ve never heard of anyone doing this.”

You may laugh that he didn’t hear of anyone doing this, but remember that it was 1996. Daytrading was not a buzzword yet, not even in the USA, let alone Canada. It was much later that the media started highlighting numerous stories about people quitting their day jobs to pursue day trading as a career. At that moment, I practically invented day trading “for myself”, even though it had been around since the first day of speculation.

One more reason I looked into such a short time frame as intraday was that I realized that I lacked knowledge about the US economy and couldn’t make much out of company reports. Therefore, I instinctively wanted to exploit the movements that were less impacted by those factors.

>From that day, my Internet search became goal-oriented. I tried to dig out everything that could help me find direction. There weren’t as many web sites devoted to trading as we have now, so my education was incredibly superficial.

In a couple of months, I was armed with an online broker, with quotes and with the Wall
Street Journal as my news source. It looked pretty simple to me. I find some good story, buy the stock, watch it going up, sell it when it stops rising. I just couldn’t see why it wouldn’t work... boy, was I in for a rude awakening!



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