Rambling thoughts about trading

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illiquid

I think I learned a bit about myself and my trading by just writing it down, so I'm back and hoping I'll be able to learn some more (and perhaps you all won't find it a complete waste of time, either). Something about putting your ideas down in black and white kinda helps you cement them into your brain (just hope that the connection between my brain and my fingertips stays clean :D).

So what was it I managed to learn these past few weeks? Not really sure, but something began to gel inside my head that hopefully I'll be able to get down in a half-way coherent fashion. I do alot of scalping, some position trades, and starting from last month began experimenting with "divergence" trading, with the idea of keeping them in separate categories. I posted some of my trades and ideas on the last group on another thread, and the results were, well -- let's just say the methodology sounded far better than the actual profits. I wanted a method of capturing a greater part of the intraday trend without giving away 1/2 my gains to my broker, yet I began to feel that the attention I was giving to this style of trading wound up being detrimental to my scalping.

So after several days of frustration (picking bottoms on Monday and Tuesday didn't help any), I went completely into scalp mode; no daily chart scanning the night before, no preconceived ideas of which stocks were going go higher or lower, just purely playing off volume and L2 movement. And the timing on the trades felt better than they had in a long time. Letting the "predictive" side go allowed me to really wait for my entries and maximize the ol' R/R ratio, taking advantage of moments where I could plainly see other traders' stops were triggered (those 100 lot-per-decimal bids getting smacked at market) and getting the luxury of a few seconds and more than a few thousand shares go by on the tape to decide whether I was wrong or not.

It felt good. When you're in sync with the market, you're not just a trader, you're a liquidity provider, a pain reliever, an angel of mercy. Then by the end of the day, after you count out your net profits after commissions, you also realize you're giving your broker and his family of four far too many nights per week at Cheescake Factory for their own well being . . . (to be continued?) :confused:
 
So what did a few profitable days prove? Not much in the grand scheme of things (and even less considering the day I stopped looking for a bottom was the first day in ages you could buy the open and sell the close with reasonable stops). I'd managed to gain some semblance of consistency to the P+L by going back to my scalping roots, yet I knew it would only be a matter of time before that "non-cognitive", unopinionated, pure tape-dancing style of trading would grow weary -- despite the profits. :confused: Sounds ridiculous right?

<flashback a few years>

I'd been there before, made my bones on learning to banish all opinion as a trading machine, buying fear and selling greed on a micro-scale, and in the beginning all I needed was to see that profit come in slowly but surely. Yet after a period of time, perhaps when I was finally able to afford to "think things over", I began looking back at what was behind those profits and seeing little more than a heap of endless transactions, a daily grind of which I barely recalled beyond the last 24 hours. "There must be more to this," I thought, with as much Bud Fox as I could muster. That was the point where I began to dream: of becoming bigger, bolder, italicized -- of becoming a REAL TRADER (kudos to J. Schwager and his Market Wizards books for providing "inspiration"). Not just some income earner getting by on the daily grind, but a percentage gainer, a compounder -- how could I ever hope to grow if I'm stuck shuffling the same thousand shares back and forth? This wasn't how the big money was made, I reminded myself. Yet instead of building upon the lessons which had produced my YTD bottom line, I let the hubris borne out of that very same success turn my previous exercise in discipline upside-down into a prison of "creative" (read: predictive) supression. I've kept the seer inside me caged up far too long, I thought, time to let loose and see how far I can really go. From that moment forth this attitude permeated my thinking during trading hours, and I began to stumble with regularity on what once was my bread and butter, as I dreamed of more lavish feasts. Profits which were once snatched up without hesitation were instead left out in the cold like newborn fawns, and eventually abandoned if they didn't mature into a level I felt I deserved; stop-losses were hit with greater and greater frequency, a frustrating spiral that could only be relieved by pulling them altogether. Not realizing my idealogical mistake soon enough, and suffering ever-worsening declines in my daily bottom line, I eventually swore off scalping as the minus-sum flipping of the market coin. Good riddance, I thought, now I would finally begin to trade free, free of the shackles, free of the constraints that have held back all those great ideas that were fermenting inside of me, eager to express themselves, eager to prove just how much potential I can realize. Now, let's see how much higher this baby can go since we've cleared 5000 . . . (to be continued :eek:?)
 
Tongue-and-cheek-tone aside as I attempt to exorcise my demons, I honestly find the Schwager books to be among the best in the subject and the definitely remain the books I find myself reading over most frequently. :)
 
The past couple of weeks have been a lot kinder to day traders than the previous few months. Profitability has increased dramatically where I trade. I have done much better myself.

But what the hell does 2 weeks prove? Someday, the market will actually bottom out, and possibly meander sideways for years. For now, I aspire to be the "grind out an income" trader who can grind out that income in a lousy, sideways, VIX at 10 type of market.

Looking at the past few months and what I am prepared to face in the next few years, the past couple of weeks are most likely an anomaly. I will make the most of today, but I can't let a good market make me feel smart. When the volatility dies and the new geniuses lose back their money, the trader who continues to grind out that income will be the smart one.
 
"I let the hubris borne out of that very same success turn my previous exercise in discipline upside-down".
.
I've had that problem in the past. As soon as I've "felt" as if I was becoming successeful because of a small string of wins I've slacked off a bit on the self discipline and it has always been a big mistake. In my experience 100% discipline makes money and 95% discipline loses it. An edge is a thin line IMO.
 
Well put Thug Life, your comment went straight to the heart of what's gnawing my brain recently: finding oneself and a style of trading that won't be so easily shaken by every which way the market winds happen to blow. It takes lots of foresight to recognize the shifting nature of what kind of market we're in, and even more foresight not to let outsized profits "make one feel smart". There's really nothing like unsolicited bits of wisdom, and I promise you it won't go to waste.

Rigel, (assuming one has found a style or system that suits one's mentality and is profitable), don't you wish sometimes you could be like that guy in Memento? (great flick, if you haven't seen) Be able to forget the result of each day's profit or loss, and instead always maintaining that careful balance on the razor edge of discipline and hunger? A pill for that would be nice :D.
 
Originally posted by illiquid


Rigel, (assuming one has found a style or system that suits one's mentality and is profitable), don't you wish sometimes you could be like that guy in Memento? (great flick, if you haven't seen) Be able to forget the result of each day's profit or loss, and instead always maintaining that careful balance on the razor edge of discipline and hunger? A pill for that would be nice :D.
More...

otnemem saw citsatnaf

BUT if there were an external remedy in the form of a pill then I would not derive the pleasure of overcoming such a folly :(

PEACE and good trading,
Publias

BTW I enjoy the thread :)
 
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