Saturday, December 27, 2008

The Weekend Trader - Four ...

Some Saturday morning thoughts before I head to Foxwoods to continue to brush up on my cash poker game (which as I've stated in turn strengthens my trading).

By the time I return from the 'woods late tonight, the countdown will be down to four days. And I view is as a critically important four days, but not for the reasons you may think.

Sure, I'm currently finally allowing myself the briefest of celebrations which will culminate Wednesday evening at 11:59:59. Those that have known me over the years know that "celebration" is practically a foreign word to me, as 99.999% of the time I only care about tomorrow. Yet I think even they would understand why I might be briefly stepping out of character when the ball finally drops this one time.

But that's when it ends. And begins. And the new beginning will mandate that I spend as much focusing on losing most of the 2008 memories over the next four days as I do allowing myself one brief glimpse backward. No, make that even more.

So what memories do I filter out of the memory bank and which do I keep? It's actually pretty simple if I look at how I typically approach each new trading day: Take the painful or otherwise constructive ones, and lose the rest.

Memories to Retain - OK, let's look at the constructive ones. There are more than enough things I did wrong in 2008 to keep me focused on trying not to repeat them. If you're new to the blog, simply check out last week's video documenting some of the 2008 errors. Warning: you may want to hold off eating until after you watch it.

And I'll add two more. Looking back at P&L by traded instrument, my Europe trading was barely positive before commissions and undoubtedly negative after considering commissions (FYI, I track daily gains & losses by instrument, but commissions only in total). Imagine. $1.62 Million, countless hours of lost sleep trying to trade Europe, and a net loss buried in that number.

Even worse, while I don't track P&L by time of day, I guarantee you that my overnight ES Globex session trading was also net negative and I incurred some of my largest losses then. So I should cut both of these areas completely out of my trading in 2009, right?

Before I answer, and as I've stated before, the huge unknown is how the losses positively affected my day session ES trading. And yes, I say positively because I know myself well enough to know I trade far better when slapped in the face and in the "comeback" mode that became my cornerstone for 2008 and beyond. So I would argue that more than some of those losses fueled the competitive fires that, in total, resulted in the 2008 Bamboo. And frankly, "in total" is all I care about.

So will ripping out the Europe and Globex session trading be like blasting out that ugly boulder in your front yard before realizing it was part of a strategic ledge that kept your house from falling into a sinkhole?? The answer is of course unknown. Yet suffice it to say that I'll be backing off from overnight trading significantly, at least for the first part of the year.

What other thoughts do I want to carry into the new year? Aside from the constructive pain, the only one I can think of is confidence. I've preached for years that I view confidence more important than my trading capital. Lose your capital and you can find a way to get more. Lose your confidence, and it doesn't matter how much capital you have ... you'll lose it anyway. Yet it has to be "confidence" ... not "cockiness". Confidence that in the long run, you can overcome any barrier presented if you work hard enough. Confidence that is critical during those bad beats and losing streaks that will always accompany this business.

Memories to Forget - OK, what thoughts do I lose? Easy. The wins and amounts. On 1/1/09, the $1.6M gets mentally reset not only to zero, but below. It's yesterday's news, has zero bearing on the future, and I have to believe it was a year full of miscues [which of course is partially true].

And I fully realize that 2008 may also be an outlier, especially given the historical year that presented record volatility which perfectly suited my style of fading extreme emotion. So I can easily consider the fall of 2008 as the "Perfect Storm" from a trading perspective. With apologies to those long the market in the investment community as my comment is strictly related to trading where the higher the volatility, the more fertile the ground for seasoned traders relying on continual price movement.

Said another way, if you look back to the daily profit distribution chart in the statistics post and simply pretend the bars reflected the number of years (instead of days) with certain results, I could easily consider 2008 an outlier to the far right. So we simply accept the year (vs. day) for what it was, know that every year (vs. day) won't be the same, and move on.

As I said last week, I frankly don't remember the 2008 gains, perhaps because that's how I've programmed myself. Even when I typed Tuesday's stats, I had to fairly quickly disregard the mention of the largest gain of the year and move on.

Some may say I have this completely backwards in that I should remember the wins and forget the pain. And that might work well for them. All I can say is know thyself. We're all wired as unique individuals and motivated differently. At my end, I need to remain humble and remember the pain -- real or imagined via the cornerstone chart -- to fuel any shot of my performing well.

So there it is. I need to have a very selective memory and do some major filtering before Thursday arrives. It will still be the year of the $1 Dollar goal, but the general premise when I do choose to trade can't change.

Fortunately, my wife would likely say having a selective memory is one of my strengths.

Enjoy the weekend.

1 comment:

RexVulgaris said...

Id like to make a cupla points on trading Globex onight. Mainly its a very different animal to rth and it can be pretty tough. Im tradin from the UK.. and Im at my desk at 1.35 am. I check out the onight asian action; from 1.30 to 1.50 spoo will generally follow Hong Kong, from 1.50 to 2am Im looking at the grey prices pre open on the Dax from IGindex spreadbetting. This is oft the heads up on the 2am move on the dax\cac futures open. Ftse and MIB open at 3am and generally I look to fade the ftse move into 3.20am. The main point is from 1.30 am to 6.30-7am spoo will most slavishly follow oseas action.

For entries im generally looking to counter the hooks of px-vol extremes where the ftse/dax/cac/mib support the trade.

The whole point of globex is to get a jump start on the day for the rth session. ASll my bigger days come of a few k banked from globex

1 other observation.. I dont use it, but in the last year the amount of daily extremes seen in the globex session has been very high.

and finally.. the downside for me trading the globex session is on TRENDING onight sessions... I can recall lots of sessions watching europe and spoo grind relentlessly in 1 direction.. any attempt to counter getting picked off again and again. By the time I get to rth my whole body feels the frustration of relentleses trend which is BAD when the head knows that 9/10 that the peon trending action is a fade.

Thats why i dont get the idea of using the globex session as seed money to get the current rhythm as for me that rhythm is comming from a different band.

[srry for long and rambling post]