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Hedge Fund Manager Eric Dugan from 3D Capital Management. Mentored by Monroe Trout.

Dugan says adapting over time and cultivating the ability to “do different things in different environments” gives him an edge. “We’re using multiple global inputs, and we’re also using different types of trading strategies,” he says. “We don’t just rely on, say, a trending model or an opening-range breakout strategy. We have mean reversion, we have pattern recognition. Having these differ-ent types of trading strategies, using multiple global inputs, and continually trying to refine and come up with new strategies is what has enabled us to be competitive.”

Managing money is, as Dugan says, a marathon, not a sprint.“As a short-term trader, you get your results almost instanta-neously, but when you become a money manager, you need to stay focused and disciplined and understand it’s a process,” he says. “You have to understand you’re not just trading, you’re run-ning a business.”

Dugan began his trading career auspiciously, landing a job with “Market Wizard” Monroe Trout right out of college. A high school friend who worked at Trout Trading and knew Dugan had worked “long and crazy” hours told him Trout had a position on the overnight desk. “I was probably out there within 48 hours,” Dugan says.

He had never traded prior to working at Trout. “I started as a junior trader, an execution trader,” he says. “It was a little intimi-dating, but it was a systematic approach — you placed the trades the system generated.”

A col-lege roommate introduced him to the futures markets in the late 1980s. Dugan worked construction during summers. The roommate was in the markets and needed money. “One sum-mer he said, ‘Can I borrow 10 grand? I’ll give you 11 grand back at the end of the summer.’ I said sure. I gave him the 10 grand, he gave me the extra thousand dollars, and that was it. It was a live cattle spread he did every summer.”

“My day typically begins around 6 a.m. I start by confirming yesterday’s trades and positions with my administrator. That’s followed by reviewing, assessing, and interpreting overnight activity in the overseas and U.S. markets. I then confirm eco-nomic data, earnings, and other announcements scheduled for the trade day. That’s followed by trading, confirming trades and positions, and then preparing for the next trade day.”

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Eric Dugan may trade the E-Mini S&P 500 futures (ES) exclusively, but his trades begin in markets and time zones far away and long before the U.S. stock index futures session begins in Chicago at 8:30 a.m. Dugan runs 3D Capital Management, the money management firm he launched after spending years on the Asian and European desks of large commodity trading advisors (CTA) — an experi-ence that helped shaped the global perspective that informs his trading approach. Dugan’s three programs (long only, long-short, and intraday long-short) use multiple global markets as inputs and indicators.“Equities, interest rates, currencies, energies, and metals in the Pacific Rim, Europe, and the U.S. are used to identify opportuni-ties in the S&P,” he says. “We don’t just use the S&P to predict the S&P.” According to Dugan, his systems analyze the flow of market action around the globe and attempt to determine how the action in certain markets is likely to impact the S&P in the U.S. trading session. “Let’s start with the Euro/yen, which trades 24 hours,” he says by way of example. “What it does in the Pacific Rim and European time zones, combined with what London Brent crude oil and silver are doing in their respective time zones, would generate a signal in the S&P on the open.” These inputs are then amalgamated in mechanical trading systems.

Video length: 4:11
Category: Education
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