Saturday, March 20, 2010

The Weekend Trader - Falling Gracefully

Some post-Jellie thoughts as I now once again transition to full-time trader and continue my journey toward block sizes.

Thank You - On behalf of my family, thank you for the overwhelming response via comment -- and especially heartfelt email -- to Friday's newspaper article on Chelsea's journey. I did some quick math last night, and including her 4x daily mandatory blood tests, she's been stuck with needles now over 14,000 times over the last eight years ... and has never complained once.

At this end, the closing quote says it all, "We have, for some reason, been given a gift that transcends a lot of what I think any of us will ever understand." Let's hope today's youth can help make a difference in a world too often filled with negativity, fighting, and misdirected priorities ... while helping us adults regain our own perspective.

Jellie 2010 Team Wrap-Up - It is done. We had a great group of eight this time around, with representation from Australia, Dubai, Denmark, and both U.S. coasts.  My thanks to all participating, and especially for putting up with my "unique" style of teaching for twenty days and four additional evenings.  What do I mean by "unique"?  Think the coach in the Facing the Giants video.  Simply put, I believe in pushing participants hard -- especially psychologically.  I do so because I believe if traders can't stand up to me in a safe team environment, they'll never be able to stand up to the market with conviction.

And while I imagine such a style turns some folks off, it's nice to continue to receive feedback like the letter I received last night that indicates such an approach remains on the right track. Will everyone tap their full potential? Of course not. Can they? Absolutely, especially as evidence continues to grow.

As for the future, it will be back to full-time trading for me after shutting down completely for the next 44 hours.  And while I won't rule out another effort in the fall or in 2011 if interest remains (a reminder it's not for the faint of heart), it's time for me to ramp up my game yet again.  In the meantime, the Jellie recordings will remain available.

Two Questions - This morning, I spoke with a trader who emailed me recently explaining how he has struggled for ten years while spending a ton on every seminar in the biz.  After chatting with him for only a few minutes, I asked him two simple questions -- already knowing the answers ahead of time.  The first was, "Do you ever think about the person on the other side of your trade?" (Real trader & poker player cardinal rule #1).  The second was, "Do you ever add to your position when the market proves you right, even if by just a tick or two?" (Real trader & poker player cardinal rule #2). His responses to both were no.

Ten years.  Tens of thousands in seminars. Hundreds of patterns and their silly names.  All missing the fundamental essence of real trading. Where have we in this industry gone so wrong??

Falling Gracefully - Several times this week I was reminded of the need to "fall gracefully" when wrong about the immediate market bias -- including in my own trading. 

In my view, grasping and implementing this concept -- as is the case with skiing or cycling -- is one of the toughest aspects of trading to learn (especially when one trades at an extremely high probability clip where you're used to being right most of the time), and one that took me years to get close to right.  And yes, I still botch it from time to time.

For example, twice this week I was very wrong and everything was setting up for possible disaster.  In one sequence, I took a 2.5 point ES stop -- a hit that large is extremely rare -- after being momentarily distracted as I was chatting with a student.  In another, I misgauged the extent of "air" on the larger timeframes as the market was opening and pulling back.

In the case of the first sequence, two things saved me from disaster.  First, I only had 1/4 position on as it was one of my "probe" trades (adding only upon price confirmation of the bias).  And second, once my trade premise broke and I was "stuck" on the retail/losing side of the trade, I waited for a slight price correction after those in a similar position had barfed the trade out at the lows before gracefully exiting -- which saved me 1.25 points.  In hindsight, I should have reversed into a short position, yet my focus was a bit of an issue that morning.

Could waiting for a retrace had it not occurred have cost me dearly if it ran against me further?  Not really, as I chose to manage initial risk with size.  For a four point hit with 1/4 size is the same as a 1 point hit with full size.

In the second instance, I was sized larger and simply escaped after a modest hit to cash until the market provided more data either validating my initial premise (which would have necessitated a re-entry, even if at a worse price), or further invalidating it and requiring a complete change of my initial morning plan.  The latter result ended up being true.

So this week, I was very wrong twice.  The sort of wrong where the band was ready to strike up the classic ABC World Wide of Sports "Agony of Defeat" theme.

Yet I was fortunate to make it down the mountain with another run under my belt, and will be able to again hit the "slopes" on Monday ... with both legs in tact.

Have a peaceful weekend.

I'll be in the lodge asleep by the fire.


Jay Nocats said...

Don, this week was extremely challenging. I saw things that were formations I couldn't draw by hand in scribbles. Very weird swings and flat lines. Starts and dead stops, or starts and turns on a dime. But I also looked back at some charts from 2 years ago that I had printed out in my journal and saw some similar things. So they weren't anomalies, just rare and odd. Sometimes everything I have can't work at all. It's fun.

steve said...

I don't think being totally wrong and getting stopped out is that bad. Being totally right, having the right bias, having a perfect entry price, and then taking the most miniscule of profit is worse. It's flat out embarrassing!