Tuesday, August 25, 2009

Survey Question

This morning the market shot up like a rocket on news (and perhaps the expectation of good news), then fell back to earth equally impressively. It was worth almost 200 pts. on the Dow. Some traders made a lot, some made a little, some lost. "Big opportunity" was all compressed in a brief 50 minute window of time. What does it take to profit in these opportunities? A solid trading plan obviously. But plans are the easy part. I am asking about something else...the intangibles (Websters dictionary: "that cannot be easily defined, formulated, or grasped").

Here are some possibilities:
1) Focus. The ability to maintain constant focus and make micro decisions instantaneously. No such "I'm going to check my email", ....or "I need a snack", or ...."the market is dead, I'm bored", ....or "it was right in front of me but I didn't see it". If you can't focus you will make some trades, but no doubt miss many others. Is that good enough?

2) Instant amnesia. You just closed a stinker of a trade and are slapping yourself on the head "what the heck is wrong with me?. I'll think twice before I enter a trade again." ...Or you close a big winner, "I'm on fire and can do no wrong. The market gods have annointed me". ....Or you just missed a setup that fit your rules and it ran for 40 pts (YM) without you on-board. You're bummed and "need to go take a walk to clear my head". If you can't get back into the "now" moment you are risking self-poison.

3) Self-trust. You have a plan which you've beaten into your head. You know what to do and when to do it. It tests out to great results over time. You are a machine. ....At least that's what you TELL yourself. In real-time you just froze like a deer in the headlights as the
self-doubts ran through your mind. Three minutes later your "trade" is up 30 points YM. BELIEVE and ACHIEVE...doubt and die. I've said it before.

4) Indifference to what happens. I have a theory that many of the most successful traders simply don't care what happens. They have a winning plan of course, and they execute it well. But when the order is placed they are truly unemotional. Their stats show they will win in the end so they don't care about this trade, or the next one. They just execute the trade and wait to record the results. They are truly fearless because they just don't care how this trade ends.

Any others? What do you think? All of them? Mix and match? What does it take to maximize your potential to profit over time?


  1. Hi. You are publishing a good stuff, getting tired of Miller and Steenbarger complex issues.

    I am an es-mini trader who developed his own technique over 15years of part time trading and now trade full time.
    I simply do not care what market is doing. I have my high probability intraday setups and regardless of profit/loss on each trade I believe I will be successful at the end of the week.
    Most of the times I do not even know or care how the market closed for the day, because I do not care what happened and I am out of positions at the end of the day.

    Today I am +3.50, +2.75, +.50 and am now in the short trade from 1029.25 with stop loss already placed.
    My only concern for today is I have seen my positions at + 14 points at their highs/lows and only was able to capture 6.75.
    I am considering new technique in my trading. It is to put a fix target of 10 points for the day and then trade very cautiously for 1 or 2 points after that.

    So that is where I am with all of this...good luck to all

  2. Great comments YM-trader! That kind of thing I need in my own learning. Coming from real traders like you guys. Thanks for sharing your ideas.

  3. driven, thanks for adding your comments. You have an appropriate nickname as many people are happy just to have a winning trade (or winning day), whereas you are upset you aren't getting more of your potential. That's a killer instinct. Well done today! (I have a feeling other days are pretty good for you too).

    GD, It's good to hear from you again. Feel free to read along with my homework I post in here.

  4. Driven is right, much more interesting topic to discuss than X's and O's.

    1. Focus- I think focus is overrated at least for me it is. The more variables your plan has would dictate how focused you have be. In fact the more "focused" I am, the more likely I seem to make mountains out of molehills, and the more my account suffers. I like being able to glance at the chart and know instantly if I am in the same zip code as a potential trade and if it is then giving it my focus.
    2. Amnesia- I personally wish I could forget everything I have learned about the market in four years of trading and just trade my plan win or fail, I would do a hell of a lot better. For example, ignoring an obvious south bound signal that goes 60+ YM points because the signal occurred at a triple bottom off the s1 level. This is applicable to any formation or pattern I've ever learned. Think how many times you have ignored one of your signals or pulled a stop early because of one of these and it's painful. Since my system doesn't rely on these I wish I could erase them from my mind.

    3. Self Trust- I think this is directly related to indifference. If you have a plan that you have back tested and you know it generates signals consistently. These signals do not always work, but with your stop and trade management it will consistently result in a net positive then move on to the next step. The first two screw this up regularly.

    4. Indifference (Acceptance)- I believe this is the zen state we should all strive to attain after we develop a plan that we know (because we back tested) works readily and if we stick with it we will make more money than we lose. I think acceptance (trade was wrong, trade was right) is a better term than indifference, although they are both saying the same thing. We took a trade that met our requirements. If it fails we didn't lose our butts because we have an exit plan. If it works then we have a plan to manage it and our trade management more often than not results in not only erasing losses, but it also results in nice profits.

    5. Growth- I think this needs to be in the list. Like Driven has found success but still sees areas that can be improved. You can always find areas to improve and grow as a trader. Pretty self explanatory I think. Growth doesn't mean throwing your whole plan out the window but adapting whatever portion you feel is lacking(backed by result or lack thereof). I trade the YM, I was stuck at painfully even until I noticed something was wrong with my management plan. I used to pull my stops +1 when a trade went +20 in my favor. I was constantly getting stopped out of good trades that low ticked me out, finally decided to alter my plan to adjust my stop management to wait for something significant to happen. I'd rather lose a small amount than
    miss out on trades that are going to erase my mistakes and provide me with a profit. That one recent adjustment took me from painfully even to profitable in one step. My new growth goal is directly related to #2 and #4 I want to get amnesia so I can truly experience indifference.

    Sorry for the book, but like I said very interesting topic. Wish more people talked about it.

  5. I was the one profiting from rocketing-price, but not too much as my rational profit target would be 1/2 the highest price. As if I was greedy, I will be the one losing. I think it's how we maintain the emotion not to jumped out irrationally when market acted too hyper.

    Nice post by the way

  6. Good points...I'd identify with #4 most of all..."Indifference" and then with "Driven's" comments....

    Get my setup and execute if it occurs, if not I close my day with nothing...Unlike Driven I rarely catch more than 1/3rd of any move on a consistent basis....and my focus is to not fret about letting "the one" get away...

    I am happy to let it go...I would never, for instance catch a rocket ride unless I had a low risk fill...

    Inevitably, that means I am nowhere close to being optimal on my trading and profitability at this point in time....but it is a goal down the road when other more essential bits and pieces of trading have become 2nd nature...

  7. Thanks for adding your input fellow traders.
    Abysmal...you have an interesting view on "focus". In the post for 8/26 you will see my LACK of focus may be/is a problem for me. Your addition of "Growth" is key for all of us.
    De'Trader...congrats on the rocket ride. Is there a better feeling?
    Sandy...You seem to be on the path. Not getting bummed by "missed" trades or anything else, is a key psychological factor. And we all know this is nothing but a psychological game.

  8. Hi YM-Trader, thanks for the reply. I think it's surpassed my expectation as Consumer Confidence kicked in. So I got out at rational maximum target price.


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