Thursday, February 5, 2009

Thursday Notes - Folding Pocket Kings

3:40pm ‘Twas in interesting day in that I pressed the accelerator at times and was wrong twice, yet apparently managed sufficiently during the day – making like a chameleon at times to adapt to the changing signals – to somehow still end with an acceptable chip gain.

The two times I pushed were on the mid-morning climb where I shorted the approach toward interim resistance, which paid for only a scalp before busting north, and after 2:30pm where I was sensing a breakout through 850 given the supporting TICK and VIX, not to mention a world of stuck shorts from the morning.

Yet both times, I had to give it up and instead eat off the menu provided. And I’m fairly pleased with how I managed both trades as I’ve been in a pretty decent rhythm lately and had strong convictions about both setups … and it would have been very easy for me not to muck the cards -- a feeling that I felt and had to fight. And it really felt at the time like I was folding pocket Kings when I knew I was beat by pocket Aces. Sometimes, you just have to make that tough laydown. And on another note, this is where trading advisory “horse race callers” can do a world of damage … it’s always about probability and the market should be the only entity ever deserving of an ego, as it and it alone is the only one who’s right all the time. Yet I once again digress.

Nevertheless, here's some therapy for all, including me: Repeat after me … “I was wrong, and I’m wrong several times a day.” At this end I was wrong a lot last year, extremely wrong on one particular day, and have been wrong during portions of every day this year … as I still await my first gross ’09 daily loss before commissions which will happen one of these days. Simply put, it’s not about being right … it’s about making money. Humility can pay big time in this business (which is why "That One Thing" post from City Slickers is one of my favorites and I encourage you to reread it). Ego on the other hand will get you crushed.

The one sequence I really botched was hesitating on fading the noon climb toward 850 on the unsustainable TICK readings. I saw it, but was slightly distracted leading up to it, and by the time I knew it was a high-probability short, my acceptable wholesale entry points had quickly disappeared as the market pulled back and I wasn't going to chase. It's always my price or nothing ... I don't haggle.

Short post tonight as it's poker night and I have to defend my Q1 1st place ranking in our local league (the winner of each quarter gets a buy-in to Foxwoods).

Let's hope I don't run into pocket Aces.


Get In Get Out said...


A very unpredictable day today about breaking 850 we had 2 double tops of breaking 850 11:11am at 847.75 & again at 1:38pm eastern time at 849. I am 1 year new to trading the sps & also was thinking about shorting after a double top but was hesitant because I do not know if that is a reliable and predictable indicator to short. Last, I wanted your opinion on trading the opening gap? Wanted to know if one of your trading strategies is? and if it is not wanted to know your opinion on the percentage consistency on filling the gap from the previous days close whether opening up gap down or gap up? Thanx Don for the insight...

Don Miller said...


I don't pay much attention to whether the market gaps or not, although I suppose I tend to initially personally fade any further surge in the direction of the gap, or fade the retracement back toward prior day trend support on relevant TICK readings for scalps.

I don't ever follow the "fill the gap" philosophy that for some strange reason seemed to be a popular notion for a while. It always seemed like voodoo to me.


Craig said...

Hi Don
Great journal have been logging on from Aus for 2 weeks or so. You have a dab hand i must say, and some great thoughs as well. I'm in the early stages of intrday trading and am playing the Aussie Spi contract. We don't have the luxury of ticks and vix here so fades are that much harder. Without that data what would you most concentrate on for timing 1st pullbacks. I like to look at the bar action and the distance it has outpaced the ma waiting for a correction to the mean. But as we know when they trend they trend.
Your motto of treating each day as if you were comming from behind is brilliant. Is there any further reading i can do on getting in at the wholesale level. Well all the best from Aus and whack a prawn on the barbie mate. I tune in every morning here, your market closing time and love it so far. thanks Don

Cheers Craig

Don Miller said...

Hi Craig and welcome to the blog.

It's an interesting question because I traded without the TICK and VIX earlier in my career and still did OK entering on first pullbacks based on price action alone.

And I view TICK and VIX more as a confirming (vs. primary) indicator than anything, as my main focus always remains on price, as that's often all you need to know.

I'm admittedly a very visual trader in terms of viewing a market based on Moving Averages, including the slope of the MAs and the distance price is from the mean. Often that's "good enough".


Severino said...

Hello Don,
Hello Gigo,

As Master Don has said so often that there is no one style that is right or wrong and that we should develop a style that compliments our virtues. With that said, I do play gaps myself.

I also follow inflection points such as OHLC (previous day open, high, low, close). As well as Pivot Point, S1,S2,R1,R2 (support and resistance.) Does price bounce of a moving average because others expect it to, so they play it causing it to. Don’t care one way or the other, I just know sometimes it does.

Here is a link to the great Dr Brett Steebarger that talks about Gaps.

May you always get a wholesale fill,


Unknown said...


Brilliantly written about the feeling of "wrong" on a daily basis!

As is I am mentoring my brother we discuss that very idea every day and how hard it is to continue betting KNOWING your going to be wrong many times, everyday, and not letting your ego do you in.

It took me a long time to be able to dump kk/aa as I kept noticing my biggest losses and everyone else (the bad players) is directly correlated with the great hands.

Ive never seen anyone blow all their chips on the average hand and in the past is where i took my biggest losers in the trading:what I thought to be the strongest set-ups.

Over confidence kills us in the trading & poker...

E said...

Suggestion for Get in Get Out

I like the analogy of sports to trading. If you are up 10-0 in the 8th inning, you are loose and swinging at pitches with confidence. (Bosox excepted; we can never have enough runs. Remember the ole Curt Gowdy trick?)

120 chart was helpful to see potential boundaries for today's range.

If you caught the long side breakout (nice penant on the 5 min), then it was worth the risk to scalp short at the double top area. Tight stop with small defined risk, and if you are so inclined, you could be hedged with a few cheap call options to participate in any remaining upside.

The other obvious choice is to walk away with profits and ignore the market.

Great forum here Don, thanks.

Trading is a lonely profession and it's fun to exhange ideas here.


Don Miller said...

Hey PK -

Unfortunately tonight, I lost A-Q to A-10 at the final table when a 10 hit on the flop. The other guy (who I know well), raised the pot, and I came over the top all-in because I sensed I had him beat.

He was also the bounty for the week, and I would have taken down both the bounty points and likely a win to dominate the standings.

So he called me and I had him crushed ... until the flop.

It's amazing how poker can made trading seem simple in comparison.


Severino said...

Sorry about the link to Dr Brett, try this,

Unknown said...


That’s the classic scenario and its amazing how we can read that situation different between us as I use to make that same play but came to realize it was too much of a gamble especially when you fought all the way to the final table.

Right or wrong, I play that situation one and the same. If I have a-10, a-j, a-q, even a-k, and someone raise into me pre-flop, I always just call it to see the flop-THEN make the next move. Only because I don’t want to go out of the tournament on a close call. Now if u had kk-aa then I would do what you did…put him to the test.

And I say the reverse for me: It's amazing how trading can make poker seem simple in comparison. !!

Your great in the trading Don!


Hello Don

Great blog, couldn't agree more with your comment about cutting when price tells you not ego.

did the same this morning, sold something breaking lows and looking like it was going to fall like a stone. It went down 2 ticks more then back up to entry price.
Quick cut, easier to make back £100 than £500 later. Stock is now 2% higher (would've hit my stop long before then anyway but you get the point)

Don Miller said...

PK -

Looking back at it, I generally agree, although it was interesting in that I read him right, and had I known 100% he had A-10, I probably would have insti-called called him since it was heads up after everyone else had folded and there was also a lot of potential bounty "equity" there.

One of the mistakes I made was he was likely pot committed when he bet, at which point I should have recognized he'd call and that I could lose everything on any kind of low probability beat even if I'd read the hand right.

And at that point I agree the laydown would have provided insurance for the rest of the tourney.

Interesting that the hand developed after today's post about folding a strong starting hand, and A-Q is certainly worse than Ks!

Shows my poker still needs work.


KN said...

"It's amazing how poker can made trading seem simple in comparison."

That is a profound statement..

I played in the same tournament and this time I made 7th but my AQ lost to his AQ by getting the rinner heart on the river beating me with a flush....does this happen in trading?

Don Miller said...

KN -

In my humble opinion, the biggest difference is that the "short-term luck" factor is largely absent in trading compared to poker ... especially tournament poker where you're forced to play marginal hands as your stack gets low due to the forced blinds, or where you're simply playing with donkeys that will call any raise with anything.

Trading is also not all or nothing ... again using the comparison more to a tournament style where all-in's are more common than a grind-it-out cash style. [Another reason I prefer cash games over tournaments.] For in trading, you can manage risk by taking committed chips OUT of the pot as the "hand" progresses and more data is revealed. [Imagine being able to do that in poker!]

It's interesting in that if I had the same hand in the same sitation in a cash game, I'm folding AQ in a heartbeat.


Unknown said...

Hey Don,

I just found out about your blog. I wanted to say thanks. I'm a novice trader and have been making all of the novice mistakes. I've been looking for a place where I can see how other traders are thinking. Reading your blog brings a little sanity to my insane emotional state.

Thursday I had a big cathartic yell. I was so frustrated because I was right about the bottom. The TICK hit -1000 right near the support point on the DOW and instead of being patient and sticking to my stops I overthought and wasn't PATIENT enough, so I exited early (such a novice!!). And instead of jumping back in I watched and sat there stunned as I watched profits run away from me.

Its amazing how my mind works. I've proven to myself how often I've been right instead of wrong, but yet I still don't trust myself. Go figure.

Anyway, I'll be reading your blog from now on to hopefully maintain my sanity Keep up the good work.


Don Miller said...

Welcome to the blog BK.

Hang in there. We've all been there and I still visit the neighborhood from time to time.