Are You Satisfied With Your Trading?

Friday’s U.S. futures trade was bookended by morning “run ’em up” and afternoon
“run ’em down” air pockets, as the lesser trends continue to dominate the
technicals.  Whether the continuing trend of weak closes leads to a southern
break early next week will depend on whether the larger logjams (hourly and
above) clear.

Until they do, U.S. index market rhythms continue to be such where honoring
micro-trends remains the lowest-risk ticket to consistent profits.  The one- and
three-minute combination continues to work well — of course it does most days,
it’s just that there’s no other game in town for the moment.  Same goes for the
DAX, although the currencies — specifically the Euro FX — have provided
several strong 13- and 60-minute setups over the last few weeks, and may provide
a first pullback trade as the week opens.

Let’s hit the charts and then chat a bit — Andy Rooney style.

As we reach our three-year column anniversary, I thought I’d revisit a few
concepts I hold dear to this business.  The thoughts aren’t in any particular
order and may not be well-connected, so consider it an Andy Rooney type of
piece.

Someone asked me the other day if I felt satisfied with my trading.  The answer
then, as it will be for years to come, was no.  Perhaps one day when I hang up
the keyboard, I’ll look back with some sense of satisfaction.  Yet it’s the
non-satisfaction aspect and pursuit of continual improvement that keeps me
coming to the office day after day with significant motivation.  The moment I
feel a sense of satisfaction creep into the mindset, there’s a 99% chance the
next trade, trade sequence, or day will be a disaster.  Been there and I try
to avoid the neighborhood altogether.  History teaches the value of humility
and if I forget, the market will remind me.

This week was a good example.  Profits in accordance with plan, yet with a
lingering feeling that I left too much on the table and/or missed a few
opportunities.  So the store opens again on Monday with a thirst for continual
improvement, all while the capital grows quietly in the background.

And while the following thought may fly in the face of a “trade with
confidence” strategy which I believe is critical to success, I find I often
trade better with at least 50% “don’t screw it up” attitude.  Call it an
oxymoron, yet such an attitude keeps me centered and alert for potential
potholes.  Maybe it’s a virtual seat belt for being in a business where
potential rewards have to be balanced with an awareness of that one catastrophic
trade lurking somewhere in the dark.  Let’s put it this way … when I don’t
think like that, I do tend to screw it up.

The approach is of course exactly why I chose to leave the comfy confines of a
corporate executive life that had run out of challenges years ago.  As I
mentioned in my last piece, trading is one of the few endeavors that will never
run out of mountains in terms of avoiding hazards, adapting to changing market
rhythms and/or regulations, not to mention all of the new markets to conquer. 
And while I find myself in my mid-forties, I frankly feel like 18 again in terms
of having a goal-driven, motivational attitude.

Switching gears, ever wonder why some folks get all excited about large market
runs, or any market “run” for that matter.  I’m not sure about you, but I care
about consistent growth in my

equity thermometer, whether the market moves five points or 500 points. 
Maybe it’s those with the home run methods or the guru/chatroom/TV ego thing
where we have to listen to a louder drumbeat of the winners to make the host(s)
look like a god and drown out the losers.  Kind of like Custer playing up his
past victories.  Or maybe it’s the popular “I’m in so let’s get everyone else
on board so I can bail” theory.  Or maybe we have to pump up our own trading
ego for self-worth purposes.  Whatever.  As I’ve said ad infinitum in the past,
if I fall into that trap, slap me hard.

Have a business plan that features high-probability first pullback trades in
multiple markets?  Being on board for any significant “run” is completely
irrelevant.  Have a plan of providing consistent market liquidity and benefiting
from repeated high-probability scalps?  Ditto.  Ignore the press and get out the
earplugs on the rest.  Ditto for my babbling … if it doesn’t help, don’t read
it!  Duh.

On a related note, for those who say one can’t adapt to varying market rhythms
(usually the ones with a vested interest who prefer you rely on a rigid
system), ask the successful golfers at this year’s U.S. Open if they can’t
adapt to changing weather, greens, and hole placement on a continual basis. 
This business is and always will be a think-on-your-feet business.  Newer
traders who are looking to master this skill in a week, month, or even year, can
also ask the group at Shinnecock Hills how long it took them to reach a point
where they could make a consistent living at the sport.  And if you’re looking
to 100% rely on your trading coach or guide (if you have one), ask one if he’d
ever let his caddie take his shot.  Nuff said.

Many of you know I was confronted with three significant family medical issues
two years ago.  I’m happy to report that all are doing extremely well and my
daughter has grown into quite an accomplished violist at the ripe age of
twelve.  My continued thanks to all who prayed for her health.  She is truly an
inspiration.

Lastly, several of you have asked over the years whether I manage funds open to
the public.  The short answer is no, with the longer answer beginning with why? 
At the risk of stating the obvious, there’s a huge difference in both business
plan and mindset — never mind flexibility — between trading one’s own capital
where one can accept 100% of the risk and keep 100% of the results, versus
“managing” external funds for a salary or percentage.  Just ask any fund
manager-turned-trader.  There’s no “right” plan of course and there’s a need for
the many great fund managers that are out there … I just choose the former for
simplicity, accountability, and personal freedom.  Plus, staff meetings are a
lot less crowded and no one hogs the cookies.

And despite the sand, water, trees, and wind that frustrates me to no end at
times, I wouldn’t trade this job for anything … pun intended.