Saturday, October 11, 2008

The Weekend Trader (Saturday Edition)

Some thoughts on this historic "Saturday After".

Nothing But Net - You know I detest looking backwards at detailed trading statistics, only caring about looking forward with a clean slate. Yet I wanted to use last week's events to reinforce two points, which are (1) all I care about is the bottom line, and (2) I define a "trade" as the net result of a day, week, month, year, etc.

And this is where there is so much misinformation out there, it's sickening. I'll be clear - you can't micro-manage this business. I've worked with a number of engineers and analysts who simply can't see the big picture and only care about looking at their statistics. Those few that do succeed do so not because of their skill at gathering and analyzing stats, but in spite of it. And yes, in my early years, I had wonderful statistics -- sliced and diced a dozen different ways -- to try to get a handle on my performance. I had an incredible array of statistics ... and a negative bottom line.

At this end, the statistics and micro-aspects of last week's events don't mean anything ... the bottom line does. The week was nicely positive despite daily "trades" revealing one horror show (worst $ loss of the year) on Monday. Friday was nicely positive (3rd highest $ gain of the year) despite the majority of my trade sequences being negative. Yet for those insistent on looking at stats, here a few to ponder:

I had 115 sequences on Friday and it was one -- 0.87% of the total -- that provided over half the daily take. 61 of the 115 sequences were negative -- for a 47% win/loss percentage. These stats fly in the face of the cottage-industry trader experts who glue a shingle onto a website and tout win/loss %. As traders we have two choices: (1) have a library full of data to dissect, review, analyze, cuss, and discuss ... or (2) develop a never-say-die trader's mindset and focus on taking shot after shot and varying size to our advantage.

Passing the Train Wreck - A related thought stemming from last week is that we can't focus on the past and have to keep looking ahead -- on a second by second basis. Have a bad month last month? Get over it. Have a bad week? Get over it. Have a bad day, start to the day, or trade (using the common definition of "trade", not mine)? You get the point.

I said last week that my Monday result would have destroyed most. And frankly, my early Friday sequences would have caused most to fold their tent and call their shrink before the day session was 5 minutes old. Friday morning indeed wiped out many traders ... that is, those who were still standing after the first four days of the week. I'll go even farther by saying that my trading for parts of Friday, last week, this month, and this year has absolutely sucked and has been atrocious -- and I mean that in all seriousness.

We can slow the car down, look at the train wreck, and as a result likely cause another crash because we weren't focused on the immediate road ahead. And there were trains off the tracks all over the place last week. Or we can look ahead. It's our choice.

Strength in Weakness - The S&P is down 38% for the year. My fund is now up 147% with the initial crazy $1M 2008 target now serving as a trailing stop on the year with two & 1/2 months still to go. The results aren't because of how good I am, but because of how weak I am. I'm human and have a lot of weaknesses to overcome ... hour by hour and minute by minute.

Counting Down - The ticker says 81 days to go. 81 days of fighting and clawing to overcome everything the market is throwing at us. 81 days of dodging and weaving around the landmines. 81 days of overcoming our individual and collective humanities. Then we'll score the year once and for all.

I'm already starting to think about 2009 and another "game" to keep me motivated. And as I've said recently, if I attain the extra $250K 2008 bonus, I'd like to do something big to give back to an industry that schooled me for a decade so I could absorb and sidestep this year's punches in this market fight of the century. Like Barry Greenstein in the poker world, I want to share the rewards. I have enough.

Whatever I do in 2009, when they finally carry me out in a box some day (boy, I hope I will have closed my last open position when that happens), I'm hoping documenting this 2008 journey will have have helped inspire those who have joined me.

Edwin Lefevre said on page 131 of Reminiscences of a Stock Operator (a classic), "If I knew how to make these statements stronger or more emphatic, I certainly would. It does not make any difference what anybody says to the contrary. I know I am right in saying these are incontrovertible statements."

I feel the exact same way about every letter and word typed here since we began the trek in July.

I'll post a video shortly and will also be in the PalTalk lounge tomorrow at 7pm ET.

Enjoy the weekend.


Anonymous said...


What an excellent post.


Niraj Prasad said...

When you say you had " 115 sequences on Friday and it was one -- 0.87% of the total" , do you mean 115 trades for the day? Is this your normal activity level or an exception on a crazy day like this Friday? I have seen some people actually reduce trading activity after a bad run, the thinking being, it may lead to revenge trading, over-trading, making the trader sloppy and reactive( emotional) thereby compromising judgment. How many trades you do on a normal day?
Do you get worried about getting burned out in an attempt to take frequent shots and improve the bottom line for the day? How do you keep a balance in this respect? Just wanted to know perspective from a trader who has been there done that :-)

Don Miller said...

Hi niraj.

Keep in mind I'm a member of the Merc and often help provide ES liquidity to the market all day long. As such, I have a lot of sequences.

As I've said before, I don't normally track my stats, but that's not an uncommonly high figure and I'm used to it over the years.

Burnout is certainly always a concern in this business, and I've taken time off over the years when I've felt burned out, and am planning on taking a nice break after the current 2008 session is over.