Friday, January 29, 2010

The Weekend Trader - Workplace Safety

Almost a year ago, I did one of my favorite posts entitled "Nine Lives" right after what was -- until last week -- my last brain cramp day.  For those new to the blog, that post is a must read in my opinion.

I say "favorite" because I've always preferred to emphasize the pains and challenges of this business over the wins and successes, since the former still seems to get such little press despite a well-known high failure rate in this business.

Quick aside -- Perhaps it's not so ironic that Paul Tudor Jones got whacked for a few million on the day when PBS followed him around during his rare and infamous 1980's interview.

At my end, I usually have 2-3 brain cramp days a year, a count which has been fairly consistent over the years.  And last week -- although I haven't discussed it until now -- I had one of my 2010 days after getting distracted overnight with a rather intense personal health scare.  The details of the health issue would definitely fall into the "TMI" category, and we won't go HD on this one.

Simply put, my head was up my a$$ while trading that day ... both figuratively and literally.  Yea I know, so much for TMI on the health issue ... but I couldn't resist the pun.

A related concept I've stressed over the years is the concept of income distribution, one example of which reflects my stats from a few years ago where each vertical bar reflects the number of days earning or losing a certain amount of funds.  The dollar figures at the bottom aren't really as important as the "outlier" bars to the left and right ... the left ones of which reflect those inevitable brain cramp days.

In "The Tao of Poker" -- one of my favorite books -- Rule 239 refers to it as the "Driver's Ed Film" day.  btw, if you haven't ordered the $10 book, why not??

So how does one get through them?

Well I'd be flat out lying if I said I enjoyed them.  I hate 'em.  Yet two things keep me going.  The first is that time and performance have shown that coming back from hits is one of my strengths, and I can point to several instances over the years -- including the "Story of Grace" post referring back to a 2007 sequence -- as well as that Monday in October 2008 where both major hits established the foundation and fortitude for record runs.

The second aspect that keeps me plugging away is my conceptual business plan ALLOWS for them.  Yes, I hate 'em and work like hell to avoid them.  But they are inevitable.  And considering 250 trading days and a very high win/loss ratio, 2-3 instances out of a huge sample size quickly becomes a non-issue.  Of course the old adage that traders can't eat like a bird and crap like an elephant (oops, another pun) remains valid, so the consistency during the rest of the time has to be able to offset the messes.

Years ago, I almost lost the tip of my thumb to a meat slicer when I got distracted in a kitchen during my college years.  And every day I can see and feel the scar.

Whether it's trading or slicing, rest assured there's nothing wrong with you if you get "cut".  And for newer traders reading, yes, it happens to all of us.  The first few days are typically painful, yet a short-term memory (also a strength of mine according to my wife ... although she doesn't call it a "strength") can work with time to provide the inevitable healing.

Perhaps Jay Leno said it best the other day when asked if recent jokes about his displacing Conan O'Brien hurt him.  He responded (paraphrasing), "How can it?  Being a comedian is like being a fighter ... you hit and have to expect to get hit ... it's part of the job ... if you ask a fighter if it hurts when he gets hit, the answer is 'hell yes, but I'm a fighter ... it's my job to get hit in the head' ".

For those that say traders are like fighters, I'll simply restate it to say that traders are fighters.  And I love a good fight.

A good cut man in your corner doesn't hurt either.

Welcome to the human race.

P.S. The comments have been re-opened.


James Stollenwerck said...


Been thinking about you since Jan. 19 when we had four trend days in a row, plus the last two days, trending back to back again.

I know MATD is one cornerstone of your approach, but I saw tick extremes which turned out to be sustainable during those days.

Rethinking strategy and doing something about it in the breach takes it's toll, so it makes sense you had hard times somewhere.

But Dr. Brett would say if you know what you're percentage win rate is, and you get it's not a matter of if but a matter of when you'll incur a series of losses, you'll trade through it okay if your money management is under control.

I recollect your percentage commitment to each trade used to be small, so you should be in good shape.

As to how increased size and block trading apply, I don't know. It can't help when things go wrong.

I'm impressed you're consulting a psychologist to help with your transition. I hope the two of you find balance between size and money management.


John Rochester said...

I just finished Jan with a 29 win to 1 loss ratio, that great! but I know that a brain cramp day is probably just around the corner.

Unknown said...

Hi Don,

i hope things will work out with the doc on ramping up trade size...ive been reading this golf book you recommended over the weekend and i have to say, this is really a fine read, especially for someone like me, who never was into sports on a competitive level...i in terms of "sport psychology" and mental training done by athletes. it dawned on me, that i have been missing a very important aspect here, so, thanks for the hint.