Saturday, May 22, 2010

The Weekend Trader - Trading vs. Competing

Please note I updated several parts of this post -- including the ending -- on Saturday A.M, so I encourage you to re-read it.

Also, thanks again to all Jellie Study Session participants as we've now surpassed $17K in donations to the American Diabetes Association!

There's "trading".

And then there's "competing".

And while it may be obvious to the astute that trading IS competing, it's been my experience that most don't view the two as being forever linked ... which is probably why the vast majority of this zero sum game give their capital to the small minority who consistently win over time.

At this end, when I'm in a rut or losing, I'm "trading".

On the other hand, when I'm in the zone and profitable, I'm "competing".

Take Friday for example.  After the early morning sequence -- which I'm still analyzing as my undersizing the trade hasn't sat well with me -- I vented and complained in the Jellie Tank for at least 20 minutes.

Some think I'm too hard on myself.  Others probably muted me (I'm doing more running audio in the room now), and I know at least one person left the Tank -- most likely because they didn't want to hear it.

But here's the deal.  When you trade alongside me (with the teaching hat off between formal new Jellie training efforts), you have to realize that I'm not trading for "fun" or looking for social interaction, nor am I trading "casually", as a part-time "hobby", or to make some "supplemental income".

In fact I'm not "trading" at all.

I'm "competing".

What does that mean?

It means I do everything in my power to "feel" the market, as well as to motivate and push myself -- including getting simply fed up when easing up on the accelerator in terms of trade size during one of those 1-2 days a year where the market is a screaming buy ... complete with our classic opening "all clear" signal that we had on Friday.

And while the attached auto-trade capture chart shows I absolutely nailed the opening sequences (to refresh your memory, the triangles are the opening and closing of sequences, and the dashes interim trades which may be adds or decreases; blues are long sequences and reds are shorts), what it doesn't show is the size ... which frankly sucked. 

And my plan to add heavy all the way up toward 1060 and then dump it on the move toward 1070?  Well, suffice it to say that I ended up using a trowel instead of a Bobcat.

Now as a quick autopsy and to ease up a bit on the personal frustration, the reads were solid, I had been trading well since the 3AM Europe bell, and the last minute pre-open Globex tank required I make a few quick adjustments on the fly, which is probably why I eased up a bit.  I also made sure I got "something" on, and sure as hell didn't short it.  My main "issue" during the heat of the battle was continuing to buy six to eight points above my initial purchase (stupid rookie mistake ... like the market cares about my position or prior entries or exits) upon confirmation, and I figured I'd have another chance to load up.  Then again, those are lame excuses. Fortunately, I didn't let the frustration result in taking any subsequent stupid trades.

In fact I did a quick survey of various trading venues around the Internet tonight, which confirmed the industry's continued silence in terms of discussing the overwhelming importance of trade size.  Instead, it was all about chart patterns.

As I've stated time and time again, the big winners in this global competition know it's ALL about trade sizing, including adding to clear winners in a volatile market to help fuel the action in light of the ridiculously clear confirming coil break triggers where risk is clearly minimized.

And the winners also know that they can't ever have one iota of doubt creep into their mind when putting on a trade, knowing that high probability will do the heavy lifting over time and they simply need to execute.

And such is why I choose to "compete" instead of "trade".

Let me be blunt.

While I don't normally discuss my wins as I choose to share more about the losses for many reasons, I made over $30K over the last few days and am pi$$ed beyond belief.  Because it should have been $60K.

And please understand -- it's not greed.

Rather, it's the recognition that this is a business like commercial fishing where you have to use a net when the fish simply show up and not a damn fishing line.

And patting oneself on the back when achieving anything less than your fullest potential does nothing to further continual self-improvement.

So I'm fighting mad.

Finally. (What took you so long Don??)

And the last time I was this mad?

No, it wasn't the May 6 flash crash hit, which didn't anger me as I simply "accepted" that part of this business.  Hell, watch the video ... perhaps my lack of anger was a huge red flag.

It was December 2007.

Before the self-imposed lockdown and exile that led to a 15 month zone of all zones.

That was the competitive commercial fisherman with the net.

The good news?

My market feel is as strong as ever, the entry and exit points have been consistently solid, the sea will still be there on Monday, and God gives us a world of tomorrows for a reason in this world where humanity trumps perfection.

Oh, and I found my net.

Frankly, I'd forgotten how big it is.

Enjoy the weekend.


emacro said...

Incidently, Thursday Bloomberg TV were reporting on the 'selling begets selling' as the S&P enters correction mode, having fallen 10% and the 200 day mov average was breached. A sign of capitulation that may have led to the rebound today.

Biased said...

great post, Don. spot on.

I have never felt more alive and in tune with what's happening in the market than when I'm treating the trading as a competition to win.


Unknown said...

As always Don, thanks for sharing!

Sam said...

The open was a obvious buy to anyone who's been following this market. In fact it seemed too easy.

Don, here's a hypothetical: Suppose it hadn't worked out and we went lower towards 1040, at what point would you have stopped out?

Yeah, I know high probability setup, excessively negative sentiment yada yada, but what would your Plan B be?

Don Miller said...

Sam -

We have protective triggers and stops in the tank. It would have been a simple stop and reentry upon confirmation.