The Weekend Trader - That "One Thing"

There's a great scene from from the classic 1991 movie City Slickers:

Curly: Do you know what the secret of life is? [holds up one finger] This.
Mitch: Your finger?
Curly: One thing. Just one thing. You stick to that and the rest don't mean s***.
Mitch: But, what is the "one thing?"
Curly: That's what you have to find out.

Well, as this year's journey nears a historic end, my "one thing" seems to be coming into clearer focus ... at least the trading "thing" ... although like many trading elements, it seems to be spilling over into personal life as well.

And while it starts with the comeback concept which I first surfaced in July, and which formed the cornerstone for subsequent performance momentum that is now apparently catching national attention (I was asked for two more interviews over the last week which I've declined ... this is now getting a bit crazy), I now realize there's much iceberg below that initial tip.

Throughout the blog, I've long said that the power behind the "comeback mentality" was that it required that I ramp up my focus by visualizing the mental state in which I've typically excelled. And that certainly remains true. Yet I've now realized that there's a second element to that concept that reaches even deeper, and that's the humbling effect a drawdown -- real or perceived -- has on one's mindset.

Why is it that many who "make it to the top" also come crashing down? Archie Karas, Internet Millionaires-Gone-Bust, O.J. Simpson, Plaxico Burress, name-your-fraud chatroom guru, AIG/Ford/Chrysler/GM execs (choose one or all), __________ (name your celebrity or athlete), and on and on. I would argue two major reasons are pride and arrogance.

And as this record race nears a close, it's become clear that the greatest power behind the fictitious draw chart is that it instills an ongoing inner circuit breaker that minimizes the chance of pride and arrogance seeping in. Essentially, it mandates humility, and humility trumps arrogance every day. And for my trading, humility has clearly become my "one thing".

And so I enter next week mentally reversing the sign before last week's chip gain. I've taken a humbling -$72K hit, there's certainly no reason to get a big head, and I need to go back to work to get it back. The more I believe that -- and by Monday I'll think it really happened that way -- the more powerful the results are ... in trading and in life.

Or to say another way:



I think Curly would be pleased.

P.S. Don't forget to check out Part 1 of my interview with David Penn, and TradingMarkets.com visitors please watch Thursday's welcome to put the blog in perspective.

Friday Notes - VIX Again the Charm

3:30pm Short post today as I'm heading out to a Holiday party tonight. I seemed to be fairly well focused and in rhythm much of the day, leaning on the short side in the overnight and morning sessions and recognizing the afternoon squeeze to the north with the 15-minute VIX in a solid supporting downtrend (see chart; click to enlarge). The result was a solid +$22K chip gain with most of the profits coming from shorting the late morning pullback to the 5-minute brick wall, and catching a few nice extension shorts on the late day squeeze.

So the first week of this final leg of the 2008 marathon -- one which I of course approached with great apprehension last weekend -- ends with a respectable +$72K gain for the week with the daily scorecards of +$7K, +$15K, +$15K, +$13K, and +$22K. But you know the drill -- it means zilch on Monday when we begin digging anew and where the mindset will be reset to think this week was a major disaster.

Three and a half weeks to go, and I seem to be catching a second wind (or is it the ninth wind ... I've lost track). That's good news.

Look for the Weekend Trader updates as usual, and TradingMarkets.com visitors please be sure to watch last night's welcoming video below to put this blog in perspective. Welcome aboard!

You can also view Part 1 of the two part interview with David Penn at TradingMarkets.com.

** VIDEO ** Welcome TradingMarkets Visitors

Tonight, I welcome visitors from the TradingMarkets.com site who have found their way here via Part 1 of my interview with David Penn [which will appear on the TM site Friday evening] and put the blog in important perspective for everyone.

Thursday Notes - Range, Range, Break

1:05pm 15 minute ADX 9.31 -- no need for much more description. Gotta be a strong break one way or the other soon. We'll see if it's today.

Thus far, the early trade has been a repeat of late Wednesday's, with the market holding interim supports, yet doing so with very little pace and rhythm as continual probes to the north have all been made with little volume and have been met with selling.

1:25pm 30 minute ADX 9.08. VIX sneaking up, but no selling interest yet either. Did they close the markets today? Checking the calendar to make sure it's not Saturday.

1:34pm Still no strong volume to push this sucker either way. Been doing small probe trades, but very limited opportunity thus far and not trying to force anything has been the name of today's game. Thought the VIX tick to the north might get us moving to the downside, but no-go so far.

Quite the difference from recent months thus far. What I find somewhat interesting is that we seem to be in a non-volatile market with the VIX still in the 60s (yet down from the 80s). 'Tis indeed a different age now and I guess we need to continue to adapt. Still, there ultimately has to be a strong break one way or the other.

btw, there was a good question posted in yesterday's comments section regarding my feelings on the last hour. My response mirrored that which I've often stated, yet I again stress it's a matter of different strokes for different folks and that trading is so much more than simply charts and patterns. There's actually some great interaction in comments to previous posts ... if you have a chance to go back and look at them again later.

Actually, it's not a bad time for me to be taking my mental break (simply defined as reduced trading), considering the highly lackluster market action lately. So I suppose in a weird sort of way, perhaps I'm still somewhat matching the market's internal rhythm in that we've both slowed it down. I imagine range traders (not my game) are cleaning up.

2:11pm zzzzzzzzzzzz. You know it's bad when I stare at the blog countdown clock. Actually, I'm tending to my non-market obligations ... always good to have something to keep you occupied and that pays the bills so you don't have to force things.

2:21pm 15 minute ADX still below 10. "Not a creature is stirring."

2:30pm 1, 2, 5, 15 minute prices and 15 minute VIX all right on top of their moving averages. Sick, but this has to pop hard soon.

2:44pm Took a probe long on that last attempted break, but stopped when it didn't hold 865. Might have some stuck longs now.

2:55pm Nice earlier stop, got some table scraps on a reverse short scalp as market clearly rejected higher prices, but that's all the market is serving right now ... scraps. Still suspect volume though and inside the morning range. Sense weakness though.

3:00pm Short 859.25 small size "just in case" I read that rejection right. Longs have to be stuck.

3:05pm Final cover 851.25. Not bad. Looking to short any pullback hard. VIX popping nicely. Want mid-50s for short, but we were coiled hard and pullbacks may be tough and shallow.

3:13pm Took 50.25 down to 46.50. Wanted better price for size.

3:16pm Strong reads Don ... now just focus. Might only get one more shot and timing will be critical.

btw, I titled the post around 1pm to try to keep my head in the game and focused on looking for the break.

3:22pm Shallow pullbacks not a surprise, but it's my price or nothing. Chip gain now in the green on the day and not giving it back. Now want high 40s to short or high 20s to buy the next puke.

3:35pm Eyes now looking to the morning for you-know-what, which combined with jobs data should be interesting. Still might take one more entry, but watching for now.

3:41pm Nibbled long on last mini-puke ... got 833.75 to 835.75. Small sizes though unless we get deeper pullback or extension to the 20s. Watch the clock Don ... time running out.

3:48pm Nice ... nailed 843.75 short and covered down to 838.75. Small sizes as it was getting late and that's a wrap.

+$13K chip gain on the day, with most of it coming late. I definitely wanted to put larger sizes on, but I didn't get my entries and settled for shallower pullback entries with lesser size to at least get something on.

I posted the chart that shows the first clues into the stuck longs. The left part of the circle shows a very bullish formation and which I probed long. But when it broke, all bets on the long side were off and the probability shifted heavily to a plummet from longs who didn't realize they were stuck until they had to panic out.

Back at it tomorrow.

Wednesday Notes - Steady as She Goes

4:00pm Quite the choppy and highly illiquid late afternoon as ES frustrated many PM breakout traders before the VIX finally got off the fence and helped push ES up into the close. At this end, I gave back some of the AM profits as getting a solid afternoon entry was like trying to catch a greased pig (I just missed a prime late day entry, but rarely ever chase and let it go), but still managed to retain about 80% of earlier day gains and end with a respectable -- albeit not spectacular +$15K on 1,248 x 2 trading. Suffice it to say it's unlikely I'll ever be a strong trader in the last hour!

In terms of today's earlier action and charts, 1st pullbacks remain the highest -- and sometimes only paying trend entries as the market plays out its current range game, and the shorter timeframe the better. 850 seemed to be pivotal several times in today's ES trade, as it went back and forth between resistance and support several times during the session. In the meantime, the ADX on all major trends including 15, 30, and 60-minute continue to drop.

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It will certainly be interesting to see how this month ends from a personal performance perspective, in part because I'm really taking somewhat of a mental break in terms of not trading Europe aggressively (if at all on many days), while continuing to trade ES rather modestly during the U.S. session.

As I mentioned last week and in the video over the weekend, the "fire in the belly" just isn't what it was one ... two ... eleven months ago as we approach the end of this 365 day marathon. And if you caught Michael Phelps' interview on 60 Minutes on Sunday, there's an interesting continuing parallel in that he confessed he had very little left in the tank before and during his final races.

And while I can certainly ramp up both the intraday interest and focus when needed for particular sequences (I took an excellent stop on the post Beige Book short covering rally back through 850), I'm finding I just can't keep it up for prolonged periods as I could for much of the last 11 months -- and especially the last three. I suppose such are the temporary scars of "going for it" when the market shifted into its Sep-Nov overdrive for traders. As a result, I'm trading far fewer liquidity-providing wholesale trades and passing on scalp opportunities I might have taken when the market was more fertile.

I have no doubt my prolonged bouts of sharpness will recover, yet in the meantime I continue to play a rather protective game throughout the month as I as I continue to consider any December gains a performance bonus of sorts, or perhaps more appropriately, final leaves on the Chinese Bamboo to keep our year-long analogy in tact.

Tuesday Notes - Slightly More Aggressive

4:00pm 'Twas an interesting day and market pace with any trend trade entries (pick your timeframe) on anything but the first pullbacks not paying. Intraday second & third pullback attempts -- long or short -- were simply brutal. As a result, being nimble and quick on 1-2 sequences and sitting out the rest of the day seemed to work well.

At this end, I picked up the aggression a bit (1,441 x 2) and finally got the chip gain back over five figures with an acceptable +$15K gain on the day. Yet most of the gains came from two sequences: the opening where we had a textbook pullback into yesterday's strong short trend, and the early afternoon breakdown which presented a similar -- albeit short-lived -- short bias.

It definitely wasn't a banner "pace" day at all in my view, but there were enough scrap opportunities to do OK provided we didn't lock ourselves into an all-day trend bias and limited damage on losing sequences as much as possible.

To that end, I'm generally satisfied with today's management, although there remains plenty of room for improvement including sizing and hold time of the two profitable sequences.

Monday Notes - True to My Word

4:25pm True to my word over the weekend, I traded minimally today -- actually the lightest I've traded all year at 150 x 2 ES contracts with no Europe trading. (Yes, that's one hundred and fifty and my broker is still looking for me.) Simply put, I decided to let the market tip its hand for much of the day today -- especially given the large gap down -- before dipping more than a few toes in the water. And not only did the market tip its hand, it cut them both off with ES down 80 points on the day!

The result was a very modest +$7K chip gain on a large trend day that often causes major problems for those of us providing market liquidity. More importantly, it was simply another personal step toward the all important December 31 mark. All eyes now turn to tomorrow's (yes, here we go again) possible morning-after-trend day action.

I was considering the 3pm retracement toward 15-min resistance as a heavier short, but passed as I preferred a double top or further extension given the extent of the day's drop, and we only got the single short-lived spike.

Frankly, the best part of today was that it arrived. Weekends can be trading momentum killers, and long weekends can seem like forever for those of us trying to maintain some sort of rhythm. At this end -- if it isn't ridiculously obvious via the weekend posts -- I had way too much time to think and just wanted to get back to business, even if it was to observe and participate minimally.

Another day, another step forward.

Tomorrow should be interesting and I'll look to get my game face on.