Monday, May 6, 2013

Feast or Famine

"It was the best of times, it was the worst of times" - Tale of Two Cities

I am sure you can guess what time it is for trading.  And I am sure you can guess what time it is(was?) for investing.  Every trader has there own style, and it can be hard to change.  I have had to make changes over my trading career.  I have been forced to adapt away by necessity (lack of retail traders, public disinterest in equities, more HFTs and hedge funds, Reg SHO)  from easy money and very high percentage win rates and confidence levels, to more difficult money and lower win rates and confidence levels.

It usually goes along a spectrum of liquidity, the more illiquid and smaller the market, the bigger the edge.  The more liquid and big markets with the smaller edges.  Sometimes, you get a tidal wave of opportunity where the big markets have big edges as well, but they are usually fleeting.  Right now, I see almost no opportunity in individual stocks or equity indexes, bonds, commodities, or currencies.  This is the worst trading market I have ever seen.

At least in January and February, buy the dip to these eyes seemed like an obvious trade, but as we got into March and April, it just didn't seem to me like a great risk reward to buy OR sell the market.  In hindsight, I was wrong to be neutral, but I would probably think the same way if I saw another market in the same situation.

A market where I can't take a confident buy or sell position is a bad trading market.  I have felt like this since the middle of March.

It in times like these where I am reminded of the importance of making hay when the sun shines.  You absolutely have to kill it and be greedy when the opportunities are there because once they are gone, it will be hard to make anything when markets turn bad/dull/unpredictable.  A good post on Elite Trader made in August 2007 (a GREAT trading market) that still sticks in my memory:

jdeeZERO05: can't ask for more volatility than this. I crushed my profit target already, i'm going to the bar. this fucking rules.

RM: Quitting early after a big gain is the second worst trait a trader can have. No offense, but you'll never be rich.

jdeezero05: have fun giving back your profits, not my game.
to me it makes sense to learn to crawl before you even attempt to fly. 20 YM points a day is my goal. When I've hit that I'm done. If i got a hundred on the week I've been done. 15 point stop, if I get down 40 points on the day i'm done. 120 points down for the week, i'm done for the week. Haven't had that happen yet with this style management yet though. 5k account, 1 car. This morning though, I rode the trend, tried to jog for the first time. Could be done for the week if I want. The remainder of this week has no emotion at all. Market is going to have to entice me with the highest probability setups I can get to risk what I made today, all the pressure is off now on the week.

To me this is exactly why most traders fail. Good look getting "to the moon" when you can't even crawl without falling on your face. Not saying thats your situation, but giving me that advice is just shit advice, no disrespect.

RM: A surefire recipe for permanent piker status if I ever saw one.

For some reason I'm in the mood to do you a favor and take the time to explain what you're doing here:

My job is to collect strands of beads off the streets of New Orleans. I need to collect 500 strands every year to make a living, so I figure I just need to collect 10 strands every week.

The past few months have been tough- I've had to work pretty hard to collect my 10 strands/week. However, this week is Mardi Gras, so there are currently beads all over the place for the taking. The streets are flowing with a massive bounty- beads are literally everywhere! I've already managed to collect my 10 strands within the first five minutes of Mardi Gras week. This is great! I've already made my weekly quota, so naturally I'll now be taking off the rest of the week. Beads crunch under my shoes during my walk home, but I don't bother to pick them up. Why should I bother? After all, I already have my weekly quota in hand, so the pressure is off. Time to hit the bar!


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