Wednesday Epilogue - Upon Further Review ...

Important epilogue to today's earlier post:

While I obviously use this diary to vent, which I did today, I feel I should more fully explain today's comments to those new to looking over my shoulder.

For those new to this journey, today's missed opportunity and reference to last year's home run wasn't about greed ... which couldn't be farther from the truth. Instead, it was about what drives the long-term P&L in this business ... and that is many small (and a few large) losses that must be offset by those occasional home-run gains -- in addition to the steady modest daily keep -- to drive a significant long-term bottom line. And this point is precisely what many scratch traders miss and is often the missing link that separates them and part-time hobby traders from the tiny minority that make significant long-term income from trading.

Of course the concept is similar to (1) my trading day where much of the day's income is made from a few trades amidst the 20-30 sequences, as well as (2) poker where cash players make their keep from those rare large hands, or tournament players who make their keep from the small # of high-placing tournament results. The rest is usually offsetting chop. Or as has often been said, you can't eat like a bird and crap like an elephant.

Said another way, you have to be like Tom Cruise in A Few Good Men, who went for the jugular when Jack Nicholson was on the stand when he sensed everything lined up and the time was right. Who could ever forget:

Jessep (Nicholson): You want answers?
Kaffee (Cruise): I think I'm entitled to them.
Jessep: You want answers?
Kaffee: I want the truth!
Jessep: You can't handle the truth!
Later ...
Kaffee: Did you order the code red?
Jessep: (quietly) I did the job you sent me to do.
Kaffee: Did you order the code red?
Jessep: You're goddamn right I did!!

If you recall, while Kaffee had prepared to push the issue and get Jessep to admit he ordered the Code Red, he was only going to push it hard if he sensed he had Jessep on the ropes. And so it is in this business as well. You had to recognize heading into Wednesday's open there was a world of stuck shorts after Tuesday's action who had to cover on any initial drop ... which was also clearly evident during the overnight Globex trade. And that is why the morning after a monster trend often provides very high probability opportunities, especially if the first move is toward the most recent trend support. As with poker, it's not about your hand ... it's about the other guy's.

100% probability? No such thing. Yet it was darn high and like being dealt pocket Aces and seeing A-A-K hit the flop. And you had to be at the table to get dealt the dang Aces.

Yet perhaps last year's daily profit distribution explains it better in pictures than I can say in words. Note the "tail" of the curve to the right is what drove a significant amount of the bottom line (7-2 ratio for # of days exceeding +/- $40K), and currently if I were to draw a 2009 curve, there would be one large loss to the far left (albeit the sole loss of 2009), and none to the far right ... the exact opposite of what I need to see. And this is exactly what is separating my 2008 vs. 2009 performance ... not going for the jugular when the probability is right.

So it's not about greed. Not at all.

It's about not falling into the trap of a scratch trader, and instead driving the long-term bottom line.

It's about "handling the truth".

I'm out of my isolation chamber now and have reactivated the comments. Thanks for respecting my privacy.