Making Mistakes — And Still Making Money

Both markets closed Friday’s session in strong 30 and 60-minute uptrends, which
may provide fertile ground for long pullback scalps on Monday should either
market retrace early.  If such action unfolds, shifting attention to potential
price vs. momentum divergences may be prudent should markets stretch
significantly from near-term supports.  Given the continuing relative weakness
in the techs despite Friday’s gains, the Nasdaq may be a better short candidate
on any weakness, using a reversal trigger off the current daily downtrend as a
trade premise.

Moving Avg
Legend: 15MA
Larger Timeframe 15MA

See https://www.donmillertrading.com
for Setups and Methodologies

Charts © 2003 Tradestation

After yet another MVP winning performance in the Super Bowl and the Patriots’
15th victory in a row, Tom Brady reflected on what he and his team had just
accomplished.  "As great as yesterday was, it wasn’t perfect," Brady said.
"There still is a lot of room for improvement."  He further recalled that when
he was at Michigan, he would ask coach Lloyd Carr what his favorite ring was,
and Carr would answer, "The next one."  Powerful.

Given such an attitude, I have little doubt that Tom would have a sound
foundation for a trading career if he ever decides to turn in the spikes. 
Combine a competitive spirit, strong pattern recognition, continual desire for
humility and improvement, a complete disregard for "streaks" in progress,
ability to perform under pressure, ability to ignore past mistakes, and perhaps
most importantly, a constant "look ahead" attitude, and you have a darn
near-perfect trader mindset. 

Late in the game, Brady threw an ill-advised interception that led to the team’s
first trailing score in two months.  Under such circumstances, most athletes
would likely have mentally crumbled, or at a minimum, scream at his receiver or
shake his head in disbelief (are you listening Payton Manning?).  Brady’s two
subsequent scoring drives to close out the game, similar to the Super Bowl
clinching drive of 2002, speak for a resiliency that goes far beyond talent.

Whether it be sports or trading, and most of you know my belief that they will
be forever intertwined, only the strongest survive.  Resting on the laurels of
one game, trade, or streak is the perfect recipe for disaster.  Tampa Bay and
Oakland, last year’s Super Bowl participants who literally stunk it up in 2003,
are examples.  Traders who don’t adjust to changes in market dynamics, whether
it be large-scale decimalization and changes in regulation a few years ago, or
simply a change in the market pace as we’ve experienced over the last few weeks,
are others.

And speaking of pace, according to those in the NFL ‘know", one of the most
likely reasons the Patriots have won 15 in a row is that they’ve chosen to adapt
to their opponent versus play the same way each week.  Identifying the weekly
environment and opponent, and developing a game play specifically for each week,
is one of the major reasons they’ve won consistently.  They’ve shunned personal
ego and the lazy yet tempting "playing the same way all the time" strategy —
which would provide their opponent with an edge — for the look and feel of a
poisonous chameleon (if chameleons were poisonous).  And such a strategy is why
most folks simply can’t understand how they’ve done it week after week after
week, including ESPN’s leading NFL analyst, Tom Jackson, who has been shaking
his head in disbelief for 15 consecutive weeks.

So it is with trading.  Play a range-bound chop style under breakout
conditions?  Play the three-minute trend when the 60 is clearly in play?  Try to
trade stock spreads — which worked for decades — in the new decimalization
environment?  Look for the lazy way out by having someone tell you what to do? 
It’s called adaptability and conviction.  Simply put, like the world’s best
team, we must continually adapt or die.

Lastly, one of Bill Bellichik’s motivational tactics during the week preceding
the big game, was to place the team’s 2002 Lombardi Trophy in the team’s locker
room to remind the team that they were in Houston for one reason only … to win
the game and bring the 2004 Trophy back to Foxboro.  Winning in 2002 didn’t
matter.  Fourteen wins in a row didn’t matter.  Being favored didn’t matter. 
Super Bowl parties didn’t matter.  One goal, period.  And for folks that don’t
believe goal setting and visualization is powerful, try tacking a key trading
objective on your monitor or wall and stare at it day after day.  It will become
engrained.

Typically, it’s those who speak the softest, have private goals, and simply
focus on getting the job done who — to borrow a line from the "Survivor" series
— outwit, outplay, and outlast the others.  And whether it be on sports’
greatest stage or the world’s largest financial reality show, those are the true
survivors.