Thursday, January 29, 2009

Thursday Notes - Driving Handcuffed

4:00pm I've never driven handcuffed, but I imagine the last few days of trading provide me some idea of what it might be like. I say that because I feel the intraday market pace -- there's that word again -- has been absolutely horrendous.

And while the VIX has been of some help in terms of not supporting strong emotion either way, and has provided a "general" long (15-min downtrend) or short (uptrend) backdrop, its frequent flat-lining as noted on the attached chart is highly indicative of the less-than-stellar market pace.

In terms of today's trade, I started poorly by focusing long on the gap down toward hourly support (continued limited size until I saw more market data), and got chopped up a bit with poor entries before recovering later in the day by -- yes, again -- shorting midday climbs after the morning gave us cues that there would likely be limited upside. Such is why I divided today's scorecard into two sessions, and left left me with yet another very modest chip gain which is getting very old very quickly. And note my personal perception of day-to-day pace as circled on the scorecard.

And so this highly "intriguing" month continues. In all my years of trading, I frankly don't recall ever having a month without a single losing day. And if I did, it might very well be a sign that I'm not pushing hard enough. If you recall, last year's largest daily career loss early in October ended with a positive week and was the precursor to the best month ever as reflected in the 2008 daily summary chart. On the flip side, it's been quite a while since I ended a month without at least one +$15K chip gain (which would be coded dark green on the scorecard based on current definitions), and January will likely end that way as I typically trade very light on Fridays.

An interesting start to what I'm sure will be an interesting year.

Every year is.

Poker night tonight ... I'll post and check comments later tonight.


E said...

"Unknowingly",I may have written about you in my journal tonight.

Not by name of course, but I tossed out the idea that some traders need to step out of their "comfort zone".

Hindsight is always easier when we "analyze", but there is a typical pattern that seems to repeat, especially around FOMC etc.

The notion is that, as you have said before, recently they left us with the "hard trade" at the open.

My reference was that traders can play overnight when that's where the edge is; can choose not to play; (what fun is that?); or can step out of our comfort zone and take the hard trade and stay with the overnight trend until the premise is broken.

Today's mirror day capitalizes on a weakness in our human nature; the need for perfection.

My wife helped me see this dilemma in practical terms: "If you saw $200 lying on the ground,and $100 blew away, would you bend down and pick up the other $100?"

If I may be so bold, may I also suggest that in your case, with last year's success, you have the enviable position of being in your own "comfort zone."

Coaching my daughter as a College pitcher, no matter what the score was, I always told her before she went back to the mound "remember the score is 0-0".

Paradox in life is everywhere.

Yes, the end result of the game is what matters, but while every pitch and every inning seems to be trivial in the larger perspective, the power of executing each and every "play" to the best of our ability cannot be underestimated, in my humble opinion.

We all have the key to our own invisible handcuffs.

All the best.

Don Miller said...

Hi E.

Yes, I do always approach every day and trade as it it were 0-0, or perhaps better said -> losing 0-2.

The handcuffing I'm referring to is actually the market pace as I think I'm holding back for good reason now, as opposed to earlier January when it was more of a mental break.

I expect to be ready when the market deals me Jacks or better ("my" Jacks ... which may be different from other's Jacks).


Anonymous said...

Don -

I'll know I've arrived when I start complaining about my long consecutive string of winning days! :)

You made mention about your consistent wins this month as getting old in today's post. It doesn't seem like that thought is consistent with your mantra of approaching every day as if yesterday's trade resulted in a huge draw down and that what happened in the past doesn't matter - wins/losses included (as you also suggest in your above comments). Just an observation. I'd be interested to have you write a little bit more on how you are coaching yourself psychologically as the result of this month's performance; I am sure there are some great lessons there for many of us to learn.

And unfortunately, at the moment my real equity curve looks like your fictitious one!

Thanks again for your blog --- still reading it every day.


Don Miller said...

Hi Stan -

This month (and the end of December) has been a bit tough for me to analyze since I purposely slowed down to give myself somewhat of a mental break.

Yet even so, I think getting frustrated with recent modest gains as of late as I try to
"restart the engine" is actually in line with the fictitious drawdown concept in that both are intended to "fire me up" and tell myself I can do better.

Certainly, balancing looking back at results can be in conflict with the drawdown concept, which is why I implemented the fictitious "prior day from hell" column in the current performance scorecard experiment. I guess it was my way of trying to reinforce ignoring recent results ... good or bad.

I still haven't looked at the cumulative month gain or balance, and won't until trading closes on Friday -- all I see right now are colors. And I'll need to reevaluate the benefit of the scorecard which may be encouraging me to look back more than forward. And if that's indeed the case, I'll scrap it.

One thing I need to keep in mind is that I personally trade best and heaviest in a highly volatile market with multiple intraday oscillations where I can be confident of wholesale opportunities as the result emotional overreactions.

And while that may go against many "popular" trading concepts in terms of lightening up during times of volatility, I do the opposite. And since January has been very much a mixed bag in terms of market rhythms and limited emotion, I probably shouldn't beat myself up too badly.

Yet I'll still continue to seek any way to get myself fired up and disappointed with performance. Perhaps the fictitious drawdown concept has run its course and I don't believe it any more. Traditionally, whenever that's the case, complacency sets in and usually quickly results in a real and hard draw.

A new month and beginning starts on Monday. And I know I can do better.

Hang in there.


Dragon Slayer said...

Hi Don,

I am just trying to get a post to work, I have tried to send a post several times yesterday and it has not seemed to get to you, maybe because I opened a new GOOGLE BLOGGER account yesterday.
Please drop me a quick email if this gets thru to you. Thanks, Prospektor

Don Miller said...

Prospektor -

Got it :-).


Don Miller said...

I'm posting this question from the my YouTube mail.

[Please note I don't use YouTube for comment responses and also don't check that much, so please post everything to this main blog site. Thanks.]

Hi Don,

Found your blog through the trader interviews page. All i can say is WOW. Where have you been all my trading life....i can't get enough of it. Thank you so much for sharing your experiences.

Was wondering why you don't trade the Q's or any equities any more.

My observation (could be wrong) is that you use 1-2 point stops to make 1-2 points per trade. What would be a similar trade management in the Q's.

Thank you,


J - I gave up stock scalping many years ago when decimalization began which cut spread profits from .125 (1/8) to .01 ... a twelvefold reduction in spread.

And given my style of trading and desire to profit by a combination of speculating and providing liquidity, a transition to futures with discounted fees made sense.

As I've mentioned throughout the blog, I don't use stops much unless the initial premise goes bust, although I do frequently scratch and re-enter and almost always scale in and out to control risk. I certainly don't use a point-specific stop, instead relying on a "broken premise" stop which isn't point specific.

Hope that helps.


E said...


Curious about your mental stop and scaling.

If your premise is broken, do you reverse, or go to the sideline and wait for another level to shape up?

Thanks, have a great weekend.


Don Miller said...

It really depends on the conditions E ... there's no hard rule.

I know that doesn't help much, but there's no other way to say it :-).