This Is Not ‘A Game Of Perfect’
Weaker than
expected employment data was just what
the market ordered on Friday to stir up some necessary volatility as the major
markets had both longs and shorts taking their turns running for serious cover.
And while both markets essentially treaded water for the week — with the S&P
tacking on thirteen and the laggard Nasdaq adding three — the lead trading
story continues
to one of enough intraday pace throughout the week to provide solid trading
opportunities.
In terms of Friday’s trade, the three-minute trend was in clear play in the
morning session as noted below, providing intraday traders yet another stellar
rhythm after a rather lackluster and anticipatory Thursday session. Yet as they
say in New England, if you think you’re getting A-Rod, just wait a day (beats
the old weather analogy), and Friday’s pace changed about as quickly as
Alex’s moving van destination.
As we close the week, let’s peek at
the expanded charts, and then talk a bit about pitfalls in deviating from one’s
proven game.
S&P 500
Nasdaq
Moving Avg
Legend: 15MA
Larger Timeframe 15MA
See https://www.donmillertrading.com
for Setups and Methodologies
Charts © 2003 Tradestation
Sticking With It
One problem I’ve encountered from time to
time, as have other traders, is deviating from what I’ll call one’s proven
“game”. Similar to golf, we’ll first define game as one’s complete
trading approach that effectively blends a trader’s comfort level, personality,
preferred technical tools, risk tolerance, etc., and that has a proven
profitability record over time.
Before I go further, let me
emphasize the last point of proven profitability, for many trade comfortably —
and may do so for years — with nothing to show for it, or worse, cumulative
losses. And while the solution may seem ridiculously obvious, that of a change
in approach much like a grip change in golf, it isn’t that obvious as the
graveyard of traders can attest. Yet for this discussion, we’ll assume that
one’s approach has been proven to be profitable.
Now your first question may be, why would one attempt to change a proven
method? There are likely dozens of possible motives, including a desire to
stretch oneself, an interest in gaining an even greater efficiency record,
consciously or subconsciously listening to other traders, tips, or analysis, and
many other possibilities.
Going back to golf for a moment, Dr. Bob Rotella, in his book “Golf is Not a
Game of Perfect” (a strong recommended read for any serious trader), speaks
of Seve Ballesteros who all but ruined his game by trying to improve areas which
didn’t really require improving in an attempt to win a U.S. Open. The resulting
mind games resulted from deviating, and then trying to rekindle the prior
successful strategy, went on to severely hinder Seve’s game from that point
forward.
At this end, I’ve fallen into a similar trap from time to time, which can be
triggered by an event as minor or subtle as a discussion with a fellow trader.
For some traders, longer-term results have been devastating as was the case with
Seve’s golf game. Frankly, I’ve found that developing a solid mental filter
that blocks out such potentially harmful “data” to be one of the most difficult
aspects of trading, especially since I’m frequently exposed to other traders and
information through the natural course of doing this column, mentoring, and
simply discussing trading aspects from time to time.
Solutions? While trading in a closet might work, such an option simply isn’t
viable for many who prefer to trade in a group environment, rely on quality
overnight trading services that provide helpful information, or enjoy discussing
trading in their off-time.
At my end, one solution when meeting with one of my closer trading peers is to
respectfully ask that we simply not discuss trading when we get together.
Thankfully, we both enjoy sports and share common interests with our daughters!
And while I continue to be exposed to various views of technical analysis
and trading methods through the course of my non-trading work, I’ve had to work
diligently to train my mind to put it aside when trading begins … the importance
of which would be impossible to overstate.
A related concept is to remind ourselves that from a business perspective, we
only answer to our own trading P&Ls, for it is the sole judge and
scorecard that speaks with the loudest, most relevant, and most objective
voice. This judge also makes the proper decision as to whether one’s trading
results are in line with one’s personal and individual goals. As they say, if
it ain’t broke …
Am I perfect at keeping the filter in place? Hell, no and I still stumble at
times. Fortunately, as a short-term trader, having a short memory is helpful
(a serious and true excuse by the way for trading, but try telling that to one’s
spouse). Plus, I’ve found that simply being aware that a filter is
necessary, is enough to establish a proper mindset at the beginning of each
trading day.
Yet as is the case with both trading and life, the road to improvement doesn’t
end until that day we make our final trade. Personally, I can’t see that far
ahead.
Good Trading and Have a
Great Weekend!