Tuesday, November 18, 2008

Tuesday Notes - Skimming the Cream

3:37pm - I still didn't feel particularly focused today, and as a result kept the vast majority of my trades to what I'll call "cream skimming", which was to scalp 1-min 1st pullbacks and exhaustion extensions for ultra-quick covers. In doing so, I purposely left some $ on the table, although in the early going it seemed like 1-min 1st pullbacks only had one brief push in them anyway until the afternoon took hold. Doing so also kept me out of potential trouble.

The result was a decent, albeit unspectacular +$21K chip gain as I simply watch the rest of the day (and ES climb as I write this).

And after thinking a lot more about Monday's trade, I feel an epilogue is necessary to yesterday's post. For when this race is over on December 31 and I'm able to finally look back at the year and all the good, bad, and ugly, it will likely be Monday that I view as one of my best trading days of the year. Not the +$70K plus, or the several +$50K plus days ... but rather this one "on the surface rather insignificant" -$6K draw day. For somehow -- and I'm still not sure exactly how -- I managed to avoid the extremely choppy afternoon chart mess on the heels of a stupid & sloppy midday trade while not feeling particularly well to begin with.

I still can't describe exactly what I did or didn't do. Yet I'm convinced yesterday will clearly stand out at the end of the year.

The short-term score remains irrelevant, except in aggregation.

The eye remains on the long-term prize.

43 days to go and counting before the ball drops.


Ziad said...

Hi Don,

First let me say thanks for all the thought-provoking posts. The thing that has helped most is seeing how you think when you're down... that even great traders make mistakes and take many losses; that it's not in perfection they succeed but rather in the consistently right mindset they uphold despite all the IMPERFECTION. Sometimes we tend to get down on ourselves when we think "a great trader would not have made such a mistake", but I think the reality is that the great trader is one who can stay poised and bounce back despite the mistake.

On another subject, I day trade the e-mini S&P as well albeit with a different style than yours. It's a totally discretionary and intuitive style but the difference is that I look for the bigger moves and thus only take about 6 trades per day on average. However, as my experience has grown I have begun noticing that I can sense a lot of the smaller moves, especially when the market is in good rhythm. As such, it seems to me that it would make sense for me to develop this style as a complement to my current style. That way I can be in trades for the "long haul" (maybe a a couple of hours), but I can also be taking advantage of the smaller moves by scalping.

So I basically wanted your advice regarding this. I want to develop my skills in scalping possibly in a style similar to yours and I thought the best way to do this would be to have a simulation platform next to my live one so I can practice scalping while in larger real trades. I'm sure you've read Dr. Steenbarger's book "Enhancing Trader Performance". In that he talks about deliberative practice and structuring specific skill drills as well as an overall practice curriculum. Since you are an expert scalper, do you think you might be able to suggest how to go about practicing in such a manner? Most of what you do is purely intuitive, but do you think you could verbalize at least how to go about developing such scalping intuition in a somewhat structured manner? Or maybe the best thing is just to improvise on the simulator and let the skills develop naturally? I'd really appreciate your opinion on this somewhat ambiguous question.

Thanks a lot,


Don Miller said...

Hi ziad.

With respect to your first comment on imperfection, one of the reasons I launched the blog was to continue to try to cut through the industry/chatroom hype B.S. where no one talks about their losing trades and stupid decisions.

Last I checked, we're all human, and despite the record success I've had this year, I've made a few significant bonehead moves and hundreds of smaller ones. I make mistakes every day ... it simply goes with being human in a performance sport. [And yes, trading is a sport.]

With respect to your other questions, I need to be careful in that I'm not providing "advice" on this blog. Yet I'll certainly continue to share what I've learned myself and what I do at my end.

In terms of scalping and swinging simultanously, while I'm not saying it can't be done, I've never had personal success in attempting to do just that ... and I still toy with it from time to time.

I've learned that my brain simply isn't programmed to effectively manage both types of trades, and I've ended up doing a lousy job at both when I've tried.

So for me, specialization and intense focus in one style has been the only ticket to long-term success ... but again, that's just me.

With respect to practice, I agree with Brett in that they can be powerful, and I created some ground breaking trader development tools in the past for that very reason. [Unfortunately, I don't believe they're available any more as TradingMarkets didn't continue to duplicate them.]

Having said that, I'm a stronger believer in that one has to trade live to truly learn. Nothing beats real experience, as mistakes and successes get reinforced much more powerfully. I just consider it to be very necessary and expected tuition.

Some thoughts from this trader anyway.


Ziad said...

Thank you very much for your detailed reply Don. I understand what you're saying regarding combining two styles not working for you. I know some traders that do it, so I guess it's a matter of how one is wired, and I guess I won't know how I'm wired until I try.

With regards to trading live, in the end I agree that that's the best experience, but I think using a simulator at first is very helpful in internalizing market patterns. So I think I'm going to start scalping on the sim platform in a totally free and spontaneous manner. That was how I first started with my current style; I just sat and tried to do what felt natural, and after months of trial and error and lots of notes it evolved into a consistently profitable style. When we're serious about our practice and yet initially playful with it I think creativity can unfold quicker and learning can be accelerated.

I'll let you know in a couple months how things have gone in that regards!

Thanks again,