How Trading Imitates Life
Both major markets finished in
the light-red this week, with ES losing
three and NQ shedding 16. Both the S&P and Nasdaq finished the week by losing
longstanding 120-minute support (see charts) on Friday, resulting in a trend day
down toward the daily 15MAs.
Such action sets up potential 15MA trading range parameters heading into next
week, given the opposing 120 and daily trend supports. Yet given the gaps
between price and weekly support, as well as daily stochastics which continue to
show excess upward momentum despite Friday’s retracement, long trades may remain
solely for the nimble. In other words, should tradable bounce opportunities
develop, keeping in mind the definition of both “bounce” and “trade” (vs. hold
into excess momentum) may serve prudent. The market will of course do whatever
the market decides.
Intraday pace throughout this earnings-driven week reflected a fair amount of
chop, with Wednesday and Friday providing some decent trend opportunities. Let’s
take a peek at the charts and then talk about perspectives on failures as my
stomach recovers from last night’s game of the century.
S&P 500
Nasdaq 100
Moving Avg Legend:
15MA Larger
Timeframe 15MA
See https://www.donmillertrading.com
for Setups and Methodologies
Charts © 2003 Tradestation
Perspective on Failures
Last night’s colossal late-inning Red Sox
failure (or Yankee success depending on your perspective) of immense proportions
got me thinking about failure in general — perhaps because most Sox fans can
easily be considered experts on the subject. And as always, it was merely a
quick conceptual hop from sports to trading philosophy where failure is an
important and required element that must be expected, managed, and — yes, even
embraced.
Many of you know that I’ve been very open over the years about my career
failures and struggles, choosing to highlight them more than my successes. I’ve
done so for a few reasons, including a strong desire to reinforce my belief to
readers and prospective traders that trading on either a part-time or full-time
basis is — for many — one of the most difficult endeavors one can pursue as
traders deal with extensive and expensive learning curves, as well as short-term
or extended periods of flat or negative income. And as we’ve discussed in the
past, this business also tends to uncover every weakness and inner demon we have
as human beings, which results in psychological mind games many can’t handle.
Such a view becomes even more paramount for those
considering pursuing trading on a full-time basis who formerly relied on a
steady paycheck, and anytime I learn of someone thinking about making a career
change, I can’t get on the phone quickly enough to encourage a heart-to-heart
talk with content not that different from that of ugly crash films shown in
driver’s education programs. Call it my version of a “think before you drive”
or protective air-bag. It may not make for an enticing book-jacket, but let’s
face it — sometimes forced feedings are necessary.
As I’ve mentioned several times, the early period of my trading career —
despite a record prior to making the transition that allowed me to make such a
change — was horrendous and tested me beyond belief. Over the years,
additional challenges presented themselves including adjusting to industry
changes such decimalization and changes in market rhythms. Off the trading
path, dealing with non-trading events such as 9/11/01 and back-to-back
socks-in-the-gut distractions of almost losing my spouse and learning that my
young daughter has a permanent medical condition resulted in focus challenges
beyond that which I ever could have anticipated, especially in the latter case
which is an ongoing challenge.
Each event resulted in a certain degree of business failure — some more than
others — yet the common thread amidst these and any challenges is that it is up
to us to figure out whether the failure is temporary or permanent.
(Remember the
Navy Seal
Larry interviewed some time ago? “Not dead, can’t
quit”.)
This business has been described by many over the years as one of survival.
Cliché? Far from it, for trading imitates life. Those that are still trading
on any given day are able to do so primarily because they are survivors.
They’ve been able to withstand changes in market regulations and rhythms, market
crises, extended periods when probability shows tails when positioned for heads,
and times of personal crisis and other non-trading distractions that creep their
ways into the trading mind. And they’ve been able to do so without losing their
base trading capital or their mind.
So long as we remain mortal, failure will always be
with us. Ted Williams failed 60% of his time in his best year and MJ missed
over half his shots. Some of the most helpful trading books — heck, books on
life in general — highlight failures. The classic trading book
Reminiscences of a Stock Operator is a good example in the trading world,
and many of us can probably recall from elementary school the stories on Mr.
Lincoln’s string of failures prior to his storied presidency. At this end, even
when I’m on my game, no day goes by where I feel I couldn’t have improved on a
market read, trade sequence, or execution. None.
Yet I think it’s the continuing quest toward perfection that drives those
of use that choose to pursue this tough entrepreneurial road. And while we know
such a goal will never be fully reached in this lifetime, perhaps it’s the
ongoing challenge and strengthening during the journey that provides the interim
rewards. Maybe that’s why Sox and Cubs fans will undoubtedly flock to Fenway
and Wrigley next year.
Now if only Grady Little (Red Sox Manager) had employed a trailing stop in the
eighth inning to protect his three run “profit”.
As is the case with professional sports, a trading career to many
“spectators” and “arm-chair quarterbacks” may seem or be portrayed as
glamorous. Yet as I’ve said from the day when we began this collective trek
several years ago, reality should drive perception, versus the other way
around. Bruises occur, they heal, and the skin thickens. Just ask any
surviving trader or Red Sox fan.
Good Trading and Have a Great
Weekend!