Thursday, February 26, 2009

Thursday Notes - Good to the Last Drop


Dear Diary,

'Twas an interesting and rather ironic day in that I usually suck in the late afternoon after a long day of trying to stay focused, yet managed well on the late-day range break and subsequent short pullback sequence to turn an early loss (largely the result of blinds and antes as I was providing liquidity, as well as stops after probing the morning attempted break to the north) into a +$8K chip gain. And while still modest, it reflects a +$13K increase over my intraday low.

So call it the exact opposite of yesterday when I got nicked late in the day by trading based on what I viewed as strong trend support, versus today where the same sequence (except to the short side of course) provided the day's take. And such is life where probability is always in the driver's seat. Yea, pocket Kings can get busted, but you still have to bet them every time.

They say a picture is worth a thousand words, so I'll let the chart do the talking (click to enlarge) which essentially reflects the last day and a half of trading. Note the nicely defined ranges, the most recent of which has now expanded from 760-780 to 750-780 (with the prior swing long of 760 providing the initial wall to the north).

And to close the book once and for all on the 2008 personal benchmarking effort, Futures Magazine just published the 2008 CTA returns this week. The top CTA for funds less than $10 Million came in at +171%, which was a drop over 2007's +205%. Interestingly enough, six of the top ten funds had less than $2 Million in assets, which in my view tends to skew the ROR upwards if excessive leverage is used.

Yet as I've stated many times before and in response to one comment last night, as a trader I don't really target ROR as I only care about Net Income in the form of a "salary" type wage or business bottom line. Nevertheless, it was a fun challenge and benchmarking effort last year to go all out during every trading day to see how one could do vs. the CTA funds. This year, I would expect personal ROR to drop as I'm simply trying to maintain the $1M net.

Poker night tonight, and I'd better be on my game as I've slipped to third (of about 30) in this quarter's rankings with five weeks to go.

I'll also do a month-end video over the weekend as it's been a while.


Peter Coussement said...

Nice job Don. It's indeed all about probability.

I'm up 5.75 points today, but that's basically the only good thing. Except that I felt tired, had too many losses, and did too many trades.
Tomorrow i got a day free from work so only sleeping and trading :)

- 6 losses: 8.75 pts
- 3 break-evens: 0 pts
- 18 wins: 14.5 pts
--> My mental stops now are about 2 points. But have the feeling it's too wide for my microtrading way.

Enjoy your poker tonight!


Unknown said...

Don't know where my head went today. Once again lost site of the bigger picture. Knew the daily 10 day MA was probably going to hit today. Sure enough. Managed to still eek out a win today. Still taking profits a little to early and not scaling out. Will try it again tomorrow.

Don, keep up the good work. One of these days I hope I can get on your kind of winning streak (if I can just keep my head in the game).

Don Miller said...

apprazzr -

For me, I find scaling in and out makes for relatively stress free trading in terms of a win/win ... i.e. for exits, if the market doesn't move further in your direction, you've already locked in some profit, and if it moves further in your direction, you still have some on. Cuts down on the "hindsight whip" a great deal at this end.

I always take partial profits "too early".

Hang in there.


Anonymous said...

Hi Don!

I'd like to know how many screens you use for trading. I have 2 monitors and I wanna buy 2 more.

Thanks and good luck!

Don Miller said...

Thanks Peter.

Stops are a funny thing ... every cottage industry "how to trade" book in the world talks about them, but many don't address how to instead manage risk with size, when to use stops, and how to "stop" gracefully.

I think that's another art of trading where we all develop our own way of taking the trade off.


Don Miller said...

Juanma -

Contrary to what many people believe and do, I have multiple monitors but only trade with one that has the charts and my order entry window.

I trade one market over and over again, and thus don't need screen space for any noise that might affect my focus.

All my multiple timeframe charts, TICK, VIX, etc. fit nicely on one 20" screen, and I can trade perfectly fine from my 11" Vaio laptop.


Charles said...

RE: "I usually suck in the late afternoon"...I am the same way fact, I can say honestly that 80% of my gains have come pre-lunch, and 80% of my losses have come afterwards.

The probabilities(in the afternoon) are, in my experience, greatly reduced. Its like there is an accute change in the mkt's "rhythm"...what do you think? I am getting temped to just be an "AM trader" only...or should I tough it out and just somehow get better at the late-day trading?

may you be on your poker game tonite,

Anonymous said...

Don, quick question...what type of an impact would you say your poker play has had on your trading? And have you ever found yourself calling on your poker experience during the trading day or vice versa?


Don Miller said...

Charles -

I have two main problems with afternoon trading at my end. First, my focus is usually far worse as the day wears on [especially if I trade Europe or am monitoring the Globex session].

Second, the longer the day wears on, the less opportunity one has to come back from a draw, stop, loss, bonehead move, etc.

Now that's just me as I know many who are the exact opposite (know thyself). Yet since I view each day as a "trade", there's nothing worse for me than losing in the late afternoon, on a Friday, or at the end of the month, quarter, or year.

For at each of those times where the long term "trade" is about to end, most of my work had better be done ... much like why I slammed on the brakes in mid-December.

I think this business is always about knowing and avoiding your own landmines.


Don Miller said...

Hi Stan -

Yes, poker has had a tremendous impact on my trading and I've written about that several times in the blog if you want to do a search in the top left for "poker".

The fifth post of the blog in July 2008 was largely devoted to trading comparisons to poker.


Don Miller said...

Severino -

In response to your private post, I'm a little confused but check the Tuesday Notes for your post and my response.

I do have a programmed filter in place for some crazies where I never see submitted comments anymore, but you're not on that list.


Charles said...

RE: "avoiding your own landmines"...good point, I certainly have a few of my own. Perhaps we could define "landmines" as: any situation, event or string of thought processes that puts a trader in a less-than-optimal state of mind(for successfully following and executing their trading strategy).

So for me, it's very important to honestly observe my own state of I well-rested, am I able to focus, etc...and then have the wisdom/discipline to adapt.

Severino said...

Hello Don,

Lol. Glad to hear I am not on the crazy list.

Sorry for causing confusion. The post I was referring to was one that I did on Wednesday. By your response it is clear that one did get lost in cyberspace.

The post on Wednesday was in regards to noticing that the once consistent strong score on Emotional Control has lost a little of it’s dark green hue.

I think if I do recall I also made a comment like, maybe it was time for a Brett mint before you kiss the next day. After reading that statement again, maybe it is better lost in cyber space.