Sunday, November 1, 2015

Times to Hustle

The market is a bit like the ocean.  There are long periods with nothing to catch and then suddenly a school of fish come by the boat and you can't haul the fish in fast enough.  It is also a bit like Mardi Gras, as I wrote a couple of years ago, Feast or Famine.

There are times when there is nothing out there.  A trading desert.  e.g. March to June of this year.  Low volatility, calm markets, and investor neutrality.  Now is one of those times.  The dry season.  You can't make rain when there are no clouds.

If you've traded long enough, you know when you need to hustle and make as much as you can because you know its not going to last for long.  The perverse thing is that often times, these great trading markets happen after a sudden loss in my account.   The opportunities are greatest when the market suddenly makes a big move, usually in the downward direction.  And if you are trading based on a low volatility regime, and buying dips, then you will lose a chunk when the vol explodes higher and the dip turns into a trench, like it did on August 24.

But the aftermath of those vol explosions is panicky trading, with more predictable and larger price movements.  The overnight futures movements get exaggerated as the fear intensifies.  During that August/September panic period, you saw quite a few big overnight moves, often times larger than the intraday movements during the regular trading hours.  A lot of that is emotional and fear based trading that produces moves that are big, but unsustainable, which often reverse during the regular trading hours.

With the craziness in the overnight futures market, I was trading more actively and getting less sleep.  Probably averaged about 4 hours/day of sleep during the heart of the volatility in August and September.  The reason was I knew I could make more by trading more during that time period.  Instinctively I knew that was the time to hustle, and pump up the score.  During those weeks, by the time Friday came around, I was heavily sleep deprived and exhausted.

Now there is no way I would sacrifice that much sleep to trade this market.  In fact, most of the time, this market actually puts me to sleep.  Even in individual stocks the action isn't all that good.  It must be the relative weakness of biotechs and the small caps that have quelled the speculative fever.  You know you have a bad trading market when the bond futures is more exciting to trade than equity index futures.

When the golden periods of the market arrive, you know you have a short period of opportunity to collect before things get tougher and return to normal.  There were a lot of good opportunities in a short period of time.  But it's over.

The time to hustle has passed.  If you didn't take advantage of these opportunities, learn from this experience.  Be prepared and stay sharp by observing the market so that when the next golden period arrives, you know to hustle and make a big score.

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