Saturday, October 25, 2008

The Weekend Trader (Saturday Edition)

OK, let's get the virtual weekend ink flowing.

Friday Night Video - In case you missed it, here are some closing thoughts for the week. And yes, I need to cut down on the Burger King meals.

"No One's Making Money?" - I'm frankly getting tired of all the recent press -- including various online venues -- that keep stressing that no one's making money in this trading environment. Well, in the world of futures, there's always a wealth transfer from the majority to the minority in play, so someone is making money.

Yes, there's no doubt the rhythm of the game has changed drastically, and we all know it took me some hard lessons and steep tuition during a few sessions this fall to figure some things out in this new environment. Yet the game hasn't changed. We're still playing Monopoly and someone still wins ... it's just that the dice rolls are occurring at a record pace.

History has shown that most of the "no one's making money" comments are coming from losing investors, traders, columnists, and especially horse-calling chatrooms as self-justification to try to retain traders when their particular "methods" suddenly stop working (big surprise ... more on that below).

Well, how about successful traders (real traders, not Wizard of Oz "you can't see what I'm doing" talking mouths) banding together and sharing the knowledge?? I don't know about you, but I can't stand people who whine. I do thoroughly enjoy the company of professionals and apprentices who freely share their continuing thirst to win the game ... regardless of its pace.

To that point, please keep the comments coming, spread the word to your trading buddies, and let's keep the positive vibes flowing for everyone so we continue to win whatever game is placed before us. Because apparently, much of the rest of the world simply wants to moan and groan ... or sell products.

"Systems" - Back to hyped methods, this environment is another great example of why the same method or system doesn't work continually over the long run. That's because the rules of the game are continually changing, and the only way to win is adapt to the evolving rules.

I'm not sure about you, but I don't want my pilot relying on auto-pilot to fly the plane I'm riding ... especially when taking off or landing through changing winds. I want him/her to rely on strong judgement and experience and make the best decision possible under whatever conditions are present.

Too often, by the time a system is developed, backtested, and marketed, the winds have changed. Sort of like being the last one on the bus by buying the market long-term in the late 1990s. I can't wait for the "How to Trade the VIX over 50" book to come out, just in time to see it back under 40.

My personal view is that systems and chatrooms appeal to the inner lazy demon that lurks in all of us. It's an easy way to shift of accountability away from ourselves and allow us to blame something/someone else. Unfortunately, that's become the American way for too many these days. Whatever happened to personal toil, perseverance, and sacrifice??

More Good Stuff From Dr. Brett - Back to the topic of those making money, here's a great post from Brett's site on Friday discussing trading behaviors among those making money now. Keep in mind that he helped fertilize this year's Bamboo tree long before it ever broke ground. I can officially give you over a Million reasons why he continues to be a class act in an industry full of clowns.

Maximizing Momentum - One of the reasons I refuse to take a prolonged break -- despite many comments saying I should consider it -- is that the overall momentum is still in my favor. For despite the occasional hits, the direction remains forward.

Right now there are only three things that will force me to consider taking a break: (1) a major health crisis (death comes to mind), (2) a prolonged losing streak (say, more than two days), and (3) December 31, 2008. Until one of those things happen, it would be stupid to stop this year's momentum as we near the bottom of the mountain. Yes, I mean bottom as in a snowball that's careening down.

And no, I don't believe in superstition or jinxes by mentioning options #1 and #2.

(Knock on wood.)

Enjoy the weekend.


RexVulgaris said...

I bought Dr Bretts book a month or so back partly on your recomendation.. and have to say it is the best book on trading I have read. It encapsulates much of what I have journeyed through the last few years.. and puts a framework on it.. particularly the notions of the internal observer and how trading becomes implicit.

Anyway yesterday I had a decent boobex.. short spoo pre dax open at 82 basis the uk sprreadbtters dumping of dax quote.. and then 3 small shorts mid 970's.. but missed the move to limit down. But had a 5k jumpstrt for rth.. Then i read round the websites.. i listened to art cashin.. i looked at asia and europe... in short my head was gone ...swept along in the long awaited washout about to happen... I was ready to trade MY emotions by 10am I had lost 6k tryin to get short... however rather than getting angry and frustrated... I found myself laughing at myself for getting caught up in the emotion of the day.. the internal observer was back in control.. and the rest of the session was very fruitful.. a great lesson on the humbling power of the mkt

Don Miller said...

Yes, Brett's book is a classic. It's not a quick read -- like The Tao of Poker -- but it's stocked full of concept after concept.

With respect to your challenge at open, I've been there and have often had a hard time coverting the brain from the early Europe and Asia trade (past history when the U.S. opens) to the U.S. mindset.

It's interesting that both times we've been at lock pre-market lately (one lock up a few weeks ago and then yesterday's lock down), that the market has opened, spiked in the direction of the lock to clean out the stuck overnight shorts or longs, and then made an initial steady move in the opposite direction to correct the excessive emotional trade.

I personally chose to back off yesterday since I didn't trade the lock a few weeks ago particularly well (jumping the gun on the reversal), but read yesterday's well and was able to nab a few shorts once it moved sufficiently high enough ... yet I kept things very tight.

At this end, any time I'm tempted to listen to Art or anyone else, I try to remember all the objective and relevant market commentary is reflected in the trade as depicted in the charts.

Nice comeback and use of the internal observer. Seems the more humble we are, the more we open ourselves up for gifts beyond our expectation.


Derek said...

Hi Don -

good thoughts and very timely video. ya got my vote on the 'no one is making any money right now'. total BS. i know there are guys making more money in single sessions than their best single years. money is definitely being made. i struggled this week because i discounted the volatility; last week i discounted its absence (compared to recent weeks). anyway, it was on me, i know it, and i accept it. no worries.

the statistical and systematization ideas are very rampant. i'm still working to get out of that mindset. it makes sense to try to mathematize everything in trading; trying to add certainty to the uncertain sounds like a logical pursuit, no? :-) but, as discretionary traders, i think it is important to work with the notion that there will be more art than science to this game. not unlike your golf analogy.

anyway, keep bringin' out the topical heavyweights - it's much needed and often neglected.

take care and have a great weekend.

thanks -


Don Miller said...

Perhaps it's best to say that there needs to be a balance between the "structured" characteristic of systems and the "judgement" characteristic of discretionary trading.

Having tools is important, but knowing when and how to use them is a helluva lot more important.


Anonymous said...


Funny how you mention that daily/weekly win/loss is not that relevant. Yet this is the second time I read on your blog that loosing more than two days in a row would be negative in more ways than one.

All the best,

Don Miller said...

Hi Tomas -

It's all a matter of degree in terms of comparing the relevance of each timeframe, assuming they're all measured at the end of the year.

Compared to Annual & Quarterly results, I believe daily and weekly W/L % as measured at the end of the year is indeed pretty inconsequential. Compared to a trade specific W/L %, it's of course more important.

Or said another way, on 12/31, I care a lot more what the monthly numbers are than data on lesser timeframes.

That's not to say that it's completely meaningless in terms of troubleshooting though.

As always, it's also simply one person's perspective. As with anything in trading, there's a balance and no right or wrong.