The Weekend Trader - Throwing Down the Gauntlet

Some thoughts on this weekend as the 2009 countdown clock has now moved under the 300 day mark, which tells me the 2009 game is in full swing and I need to keep the recent momentum going.

"No Regrets" - Some diary onlookers have commented favorably on my adding "No Regrets" to the daily scoresheet. Over the years, I've found focusing on a goal of having no regrets by the end of the day (with or without a formal scoresheet ... which remember I just began using recently as an experiment) can be a huge help in avoiding the woulda/shoulda/coulda hindsight pain.

This concept came in handy when I first pursued a trading career, especially as I -- like everyone -- drove through the early potholes, ruined a few axles, and occasionally thought about giving up. And after Tuesday's trade, it became clear that for some reason I'd begun hesitating at times and needed some way to recapture trust in my instincts and simply accept the lesser probability outcome if I was wrong.

Obviously, it seems to have helped ... at least a little bit.

Indicator Preference - I still occasionally get questions asking me why I don't use certain indicators, the most recent one addressing candlesticks. My canned response -- which btw will never change -- is "why do some people like black cars and others red?" Or said another way, if I want to know how cold it is outside, I have several choices ... check the thermometer outside the window, check my Google home page, tune into the Weather Channel and wait for "Local on the 8s", or step outside and feel it. I don't need to check them all! So I usually just check the thermometer and then confirm it when I step outside. And I don't care if the thermometer is digital or mercury based.

When it comes to charts, it's the K.I.S.S. rule for me and I simply try to keep my charts as basic and uncluttered as possible. Some of the charts I saw at the Expo would make one's head spin. Hey, if you want to drive a Ferrari -- or perhaps a better analogy is a Lear Jet ... and on auto pilot for that matter -- down the street to the grocery store several times a day, then perhaps you're more interested in the fancy plane than getting the goods. Yea, I know there are lots of vendors selling Lear Jets and auto pilots ... 'nuff said.

Don't get me wrong ... I like toys. But I'd rather be focused on earning income. Plus, for many younger traders, "toys" are a crutch ... pure and simple ... and are like trying to cure nearsightedness with Aviator sunglasses. And while crutches can of course help, most people who use them just need to learn how to walk.

Hell, all I know is this. Crutches sold to people who should just get off their a$$ and learn to walk make money for crutch vendors. Fancy PCs and displays put money in vendor pockets, and guru horse race advisory "do this" calls put money in guru pockets. Both are crutches. There are only two pockets I'm interested in putting money in ... and I happen to be wearing both of them.

And while I don't give advice on this site, if it were me teaching my daughter to run to the store and back, I'd say, "There's the car. It's proven to be highly dependable, has an accelerator, brake, and steering wheel, and the store is right there (pointing). See you in ten minutes."

I'm not kidding when I say much of my trading is done on a 11" laptop when I'm traveling, and it has no detrimental effect on my trading. None. And even my main trading station consists of a single trading screen. Yea, I know, it's not eye candy ... but I don't care for high-priced junk food.

As with life, less is more for this trader ... a lesson I've learned many, many times in my soon-to-be (next Tuesday ... hint) 48 years on this planet.

Trader Transaction Tax Updates - A reminder that Green & Company posts occasional updates on their view of the tax issue on their blog. I check it from time to time, and there was a recent update on March 4. My most recent comment on this can be found at the end of Wednesday's post.

Views on "Ejection Lever" Stops - As I've often said, I'm a huge believer in managing risk, yet rarely use "stops". Huh?? Well, let me clarify that I rarely use my definition of a "stop" which to me means completely forgoing an attempted trade sequence when the initial premise for the trade is no longer valid.

Now we need to keep three thing in mind. First, I manage risk primarily with size. Second, I'm usually beginning to enter when prices approach wholesale levels ... meaning I already have a decent starting hand, so the probability is usually pretty high and I've got to be pretty damn wrong for the market to move hard against me. And third, I often scratch and reenter trades -- which I only consider as temporary pauses to reassess, followed by re-entries at better prices or upon further confirmation -- which are not stops.

So to me, stops are the final "cease and desist" order.

OK, so when do I use them? Well, I had to dig out the tool on Friday morning after the range break to the north on strong volume failed to do anything other than pause on the pullbacks (see attached chart; 5-min on top 60-min on bottom; click to enlarge). So the sequence went something like: provide liquidity for the panic short coverers, cover on the retracement toward the mean, and then position 2 or 3 times to reverse into the pullback long entry, scratching several times along the way, before finally "stopping" pursuit.

Yea, I know the 60-min was down, and had there been a double top of sorts, the entire wholesale world would have been shorting the hell out of any weaker second pop ... too obvious of course. Yet I certainly expected there to be what I call some interim 5-min vs. 60-min ping-pong activity. But the market of course had other ideas, and I had to pull the ejection lever.

2009 Goal Update - After toying with another slightly higher figure earlier in the year, I've decided to not fix what's not broken, and have adjusted my '09 bottom line goal to mirror the initial '08 goal of $1 Million. Should I exceed it, I'll do the same thing as last year in terms of setting it as a trailing stop and being on a 100% free roll, yet should I earn only a penny over it, it will be an extremely satisfying year to go back-to-back.

And yes, for the first time in a while, I personally revisited the final 2008 "Night to Dance" diary entry the other day (which btw was always meant primarily as a motivational tool for others), which included the following blurb:

Regardless of what happens in 2009 and beyond, no one will ever be able to take 2008 away from me. Ever. Like other far more important life milestones, the year will find its own place in a corner of my heart that I'll be able to tap whenever I question my ability to conquer a challenge in front of me.

Why did I look back? Well frankly, I needed a morale boost. For as extremely harsh as I am with my own trading and performance day in and day out, I needed to tap that feeling -- if only for a brief moment. I needed to see that carrot on the stick.

As I mentioned in last weekend's video, the industry's top CTAs rarely -- if ever -- have two exceptional years in a row. As such, some have recently suggested that my 2008 performance was an anomaly, and that it would be impossible to sustain the necessary focus and skill level to have back-to-back million dollar years, especially in "this market environment" (whatever the hell that means ... last I checked markets still go up and down).

At that very moment, the 2009 gauntlet was thrown down and the internal bulletin board material went up.

I suppose some will never understand that rattling the beast only makes him hungrier. Well, consider the cage door opened.

And should I fail? Well, I'll have no regrets (** see footnote below).

Have a relaxing and peaceful weekend.

** btw ... I don't plan on failing.