Saturday, February 14, 2009

The Weekend Trader - Nine Lives

While I believe in rarely if ever looking back at my trading "life", I couldn't help doing a small amount of research to determine how many days I've had in recent memory that I would classify as "brain cramp" days that resulted in a significant loss. And so I decided to look back at my records since I joined the Merc in 2004 to see how may days I'd figuratively lost my lunch. Although in some cases it may have been close to literally.

The answer? Nine, which includes this past Tuesday. (btw, while Tuesday was a tiny dent %-wise, I'd still classify it as a brain cramp day as I let the distraction send me into the Maverick Top Gun nose-dive). So nine times out of the last 60 months or 1,260 trading days, I coughed up a major hairball. Whether you call it going on tilt, revenge trading, or whatever, it happened. And it hurt.

Now most know that I don't trade a "system". Frankly, I hate systems as they often preclude one from using experience and judgement. Plus, there's no room for personal creativity. I was reminded of this the other day when I was watching the current Poker After Dark re-runs where they have all the math guys playing a tourney against each other. It was like watching six robots play against each other with no creativity, and the game pace was atrocious.

So I instead prefer personal judgment. As I mentioned in last month's interview with Tim Bourquin (of which a free online transcript is now available), I consider myself a discretionary trader who bases his decisions largely, but not solely on technical analysis. Simply put, as my career has evolved, I've learned to simply trust my judgment and interpretation of current market action.

Yet since that judgment is of course not always correct, perhaps I am trading a system. A system based on probability that my judgment is right. A system that expects and allows for the times when I'm not on my game or my decisions are skewed. A system that provides for times when I don't react quickly enough, or worsen an initial poor decision.

Based on comments to the blog, many new seem fascinated by the 2008 Bamboo year and the early 2009 winning streak. And to some, it may seem incredibly easy and pain-free. Well, here's one of the main reasons I chose to go public last year with my trading diary: It's not. As I've said ad infinitum, I make suboptimal decisions every hour of every day. And from time to time -- nine over the last five years to be exact -- my "system" broke in a major way. Nine times, I've been socked in the gut in ways that challenged my very soul. And yes, earlier in my career I was in tears a few times and all but quit.

I find it interesting that the final 2008 "Night to Dance" post is running #2 in terms of ongoing visits even to this day. The #1 accessed archive post? The October 2008 personal meltdown. And I think that is a very good thing, as it tells me that onlookers are indeed balancing the good with the bad, perhaps placing even more emphasis on the bad. And if that is indeed true, then the blog may be accomplishing its intended purpose of trying to help lift the veil of an industry that is hyped and marketed to death. btw, I suggest you also read the subsequent posts of that October week to put everything in its proper perspective as the week ironically ended with a gain. You have to pick yourself up ... no matter how much it hurts.

Simply put, you can't experience the joy of the dance without going through the inevitable initial and occasional ongoing pain. For no one has ever reached significant performance levels in this or any other skill-based industry without first incurring a helluva lot of personal pain and self-reflection, and then revisiting the neighborhood from time to time.

Such is why this deeply personal diary is public and non-commercial.

Sometimes we even need nine lives.

More to come over the weekend, including a likely video and update on the Boston Area Trader Group.


nocved said...

Hi Don

I think that was one of your more important posts. Or maybe I just needed to hear it.


Don Miller said...

Hey Tom -

Maybe I needed to write it to hear it again myself.


Unknown said...


One of your best posts Don. Especially the part about mechanical trading systems, and the fact that over time you become your own "system". I look forward to hearing more on your video about the trader group.


E said...

No pain, no gain.

You are a Bosox fan, right?

That's the only training we need to persevere through the good, the bad, and the ugly. (85 years was a long time).

Nobody puts their soul out there like you do for the world to see.

We all appreciate it Don.

It's easy to be an armchair economist; getting bumped and bruised in the real world and picking ourselves up is the challenge.

Thanks again for your integrity and willingness to inspire by example.


Jason Elfenbein said...

I absolutely love this post. Thank you, Don. IMO, in terms of trading wisdom, this is as good as it gets. There truly are no shortcuts in trading; no ways around the hard lessons and necessity of accumulating screen time. Also, BTW, I share your assessment of this week's Poker After Dark game -- those math guys were brutal to watch, especially Chen.

James Edwards-Marche said...

"Simply put, you can't experience the joy of the dance without going through the inevitable initial and occasional ongoing pain. For no one has ever reached significant performance levels in this or any other skill-based industry without first incurring a helluva lot of personal pain and self-reflection, and then revisiting the neighborhood from time to time."

That's the kind of statement which should be framed and hung on the wall. Brilliant post.I believe sharing the fact that you've broken down and cried during early trials and tribulations will be very helpful to those who are in that position shows that they too can make it if they persist. Great work :)

E-Mini Player said...

Excellent post Don! It's humbling to see a professional such as yourself take these kind of hits from time to time, and is a reminder of the inherent risks involved in trading. I've met some traders who often forget this part of the business after a few winning days/weeks.

Get In Get Out said...


Wanted to know on average how many times during the trading day & the amount of time you just sit out because you cant read the market or a particular trend & how long the time periods usually are? On most trading days do you have time periods where you sit out for 1/2..1 hour...2 hour time stretch increments simply because you have no idea or are waiting for a trend to develop? Last, what do you do for those time periods so you dont go insane & trade just to have a position. Are you simply sitting back watching the market or reading trading blogs searching the internet letting time go by untill a move u like develops? I would assume that someone who is very impulsive with add would lose alot of money being stagnant and impatient during a 2 hour time stretch waiting for a trend to develop. Don you are the invaluable truth behind this industry! Matt

Don Miller said...


Keep in mind I currently have a non-market business as well that also requires attention, so if the market isn't setting up, I'll often increase my focus in non-market areas while keeping an eye on things.

Over the years, I've been most active around the open, but it depends on how the prior day closed and whether the open is primed for a high % read.

Not sure about the "invaluable truth" ... which better fits people accomplishing things far greater and more pertinent in life than trading.


nocved said...

Food for Thought:

Driven! said...

Don, you are the "trading industry"
and because we measure a GOOD trader based on the points made during day, week, month, year.. What would you consider being a good scalper in terms of points made per day or a week, regardless of number of contracts? as an example, would +4 points on an average a day be: "Wow, he is a good trader!"(or without the exclamation point:))

P.S, how about those last 25 minutes on Friday? Caught some on 3line break(lovely...)

E said...

Nocved: Thanks for the link.

Lengthy article but great read.

"The I.Q. of where to be, probabilities, we cannot control the outcome, offense and defense, and quietly get our job done" leapt off the page at me.

Work ethic also came through loud and clear.