The Weekend Trader - Super Sunday Thoughts

Some thoughts on this Super Bowl Sunday:

Prior Day Comment Responses - A reminder for all that some of the best discussion on this site takes place in the Comments sections of prior day's posts, and I encourage serious onlookers to always go back a few days and see if there's been new discussion or follow-up to recent posts. The last few days are good examples.

My Readings - One recent comment asked me what market material I usually read. My response was Briefing.com during the day, two sections of Barrons on Sunday, and an occasional peek at Dr. Brett's site. Other than that, I have no interest at all in reading anything that might provoke thoughts that would interfere with consistently applying a proven methodology reflecting a decade of work.

K.I.S.S. - And speaking of Dr. Brett, he had a good post last week discussing 3 basic trade setups. It was great timing considering I mentioned in last weekend's post on "Trading an Edge" that trading edges are usually incredibly simple. Continued note to self: Keep it simple, stupid.

My Trading Screen - For those new to the blog, there's a good pic of my trading screen embedded in last year's August 15 post. The only difference now is that I'm using eSignal charts instead of Tradestation, but the layout and placement of screens, including the DOM order entry window overlay on the chart, remain the same.

Trading Small Accounts - There seems to be a growing perception that I can generate the results I have simply because I have a large account of over $2M. The best way to put that to rest is that while I can trade close to 500 contracts based on current contract margin requirements, my typical trade sequence size usually ranges from 15 to 60, and I don't recall ever having 100 contracts on during January. And 15 contracts only requires a $93K account (15 x $6,188 initial margin = $92,820). For me, it's simply a matter of chipping away with lots of singles and doubles and letting the countdown clock to the left do most of the work.

Now to anticipate questions on this (heck, I'm a trader and it's my job to anticipate), why haven't I increased size? Four primary reasons:

First and foremost, as I've learned over the years, "Why fix what isn't broken?" I'm very comfortable trading lots in multiples of 15 or 30 [over and over again of course] and it works for me. And thinking back to my trading career and Golf is Not a Game of Perfect where Seve Ballesteros tried "tinkering" with an already successful game which all but ruined him, I'm well aware of the dangers of trying to improve something that works. Remember how we ended up with Coke Classic after the "New Coke" bombed?? I also hate the new BMW styles which is why I'm going to try to keep Grace (born 2004 and adopted 2007) for years to come.

Second, it allows me to put less of my capital at risk over time, which provides me with a huge psychological edge as time goes on. Again, as pointed out in yesterday's post, I'm only interested in profit ... not ROR.

Third, I've seen the dangers firsthand of using large capital to increase size above acceptable risk proportions by fading perceived market extremes (remember, most of my trading is about fading extremes ... extreme pullbacks or extreme unsustainable emotional spikes). Last year's day from hell -- which by the way gets a large number of hits daily (must be like why many watch NASCAR ... for the crashes) -- is a prime example where having the large balance caught me. Simply put, deep pockets can hurt as much as help, if not more so.

And fourth, keeping sizes to comfort levels allows me to maintain an ongoing untapped "future" challenge in my hip pocket should I decide to ever focus on increasing size substantially. That alone will require substantial focus and dedication which I'm not currently ready to pursue.

Again, there are no absolute rights or wrongs in this business ... only lots of grays and personal preference.

To me, Trading will always remain an art. And as I've mentioned in the past, I believe we all have a blank canvas and can choose to paint by numbers or go freehand. We can listen to computer programs or someone screaming over our shoulder telling us how to paint, or we can go into a quiet corner and become a self-sufficient artist.

We can certainly pay for some initial lessons and even some continuing education from quality and proven instructors (I'd of course first certainly want to see the actual pictures they painted ... but don't get me going) -- nothing wrong with that. Yet in the end, the final picture is a reflection of our own personality and soul.

The next blank canvas and brushes arrive tomorrow.

Enjoy the big game and rest of your weekend.