Through the Looking Glass

[illiquid]

Quote from Redneck trader:

Would you mind describing how you know, and why, you are cutting your losers short? (and if not no biggie)
RN

With the question quoted above, it seems as if you're thinking I meant "short" as in getting out of positions too soon before they work out? By "short" I just meant cutting losses before they get out of hand ie reacting faster to situations where I am mistaken, instead of sitting on losers hoping they come back. If we are on the same page, then . . .

I have a framework in how I select trades, but in the end they are pretty much all case-by-case on a discretionary basis -- not unlike no-limit poker hands. I might see many similar elements in 2 setups but because of a single difference go short instead of long. Nothing is really crystal clear for me at the outset, usually it takes an open loss + subsequent tape action to spell things out clearly that I should just exit. Most of my losing trades are a matter of me jumping the gun on a position, I'll take a risk in being early in exchange for a larger position and/or better price. Waiting for a completely clear GO usually results in a smaller position and chasing if I want the rest. Keep in mind I tend to trade less liquid names in higher volatility situations -- there just aren't that many shares to go around at any given moment.

I agree if things were more mechanical it would be easier to just put a stop in and move on to next setup. But it's just not in the framework. I think it all boils down to how much trust is placed upon the tape itself. For me, there are times when the tape just can't be trusted, perhaps a program bluff that needs calling for one to take or stay in the correct position. And yes it does leave me off balance at times when things just need to be played straight up.

Can I "act" more mechanical, a little more selective, be more disciplined in my choice of entries? Most definitely. But I think the attitude from which to gain the most comes into play after the entry is done, in looking ahead. As you say, "Then our primary (only) task is to sit and wait – either on the next trade (set up) to materialize, or on the trade we’re in to come to fruition – win or lose." That's the game in a nutshell.

 

[tstones]

Here are you referring to index futures expiration? Do you generally cut back shares traded during these 4 months? thanks..

Quote from illiquid:

P/L for this week: -4,700 on 433k shares traded.

-6, +4, +8, -4, -6

This week was typical in the volatility of day to day p/l for me; not so typical was how it was arrived. I concentrated on cutting losers short, as my losing days usually come from one or two positions going very bad, and that went well. However, I also ended up churning a few stocks, most notably 77k shares of AIG on thursday for a loss of -3.7k. On good days I only tend to trade around 30-40k shares in total; I am a poor scalper, and my share count traded in a stock is directly correlated with how much I'll lose in it. Also, I normally don't hold overnights for an entire week but the position looked good -- until POT guidance caught me offsides Friday.

A disappointing start, but I really shouldn't expect too much during expirations months (mar, jun, sep, dec) in between earnings seasons. And so my total volume should reflect that, which it didnt; my biggest error this week was just clicking away at the kb when there just wasn't anything (for me) to do. I was also reminded about how I can lose just as much or more trading around a losing idea as holding it straight all the way til my puke point -- I "rewarded" my quick loss cutting with multiple attempts at the same trade, instead of just moving on. I think I need the ability to visualize the "perfect loss", and it should look something like this:

ABC 2000 shrs -XXX

Next.

 

[illiquid]

Quote from tstones:

Here are you referring to index futures expiration? Do you generally cut back shares traded during these 4 months? thanks..

Futures expirations coincide with the lull months of earnings season, so yeah the idea is that my volume should go down. Normally I need to "work" hard to hit a million shares for these months.

 

[trackstar]

Quote from illiquid:

Futures expirations coincide with the lull months of earnings season, so yeah the idea is that my volume should go down. Normally I need to "work" hard to hit a million shares for these months.

Wow that is very interesting. Makes sense but only something a seasoned trader would pick up on.

 

[Redneck]

Quote from illiquid:

With the question quoted above, it seems as if you're thinking I meant "short" as in getting out of positions too soon before they work out? By "short" I just meant cutting losses before they get out of hand ie reacting faster to situations where I am mistaken, instead of sitting on losers hoping they come back. If we are on the same page, then . . .

I have a framework in how I select trades, but in the end they are pretty much all case-by-case on a discretionary basis -- not unlike no-limit poker hands. I might see many similar elements in 2 setups but because of a single difference go short instead of long. Nothing is really crystal clear for me at the outset, usually it takes an open loss + subsequent tape action to spell things out clearly that I should just exit. Most of my losing trades are a matter of me jumping the gun on a position, I'll take a risk in being early in exchange for a larger position and/or better price. Waiting for a completely clear GO usually results in a smaller position and chasing if I want the rest. Keep in mind I tend to trade less liquid names in higher volatility situations -- there just aren't that many shares to go around at any given moment.

I agree if things were more mechanical it would be easier to just put a stop in and move on to next setup. But it's just not in the framework. I think it all boils down to how much trust is placed upon the tape itself. For me, there are times when the tape just can't be trusted, perhaps a program bluff that needs calling for one to take or stay in the correct position. And yes it does leave me off balance at times when things just need to be played straight up.

Can I "act" more mechanical, a little more selective, be more disciplined in my choice of entries? Most definitely. But I think the attitude from which to gain the most comes into play after the entry is done, in looking ahead. As you say, "Then our primary (only) task is to sit and wait – either on the next trade (set up) to materialize, or on the trade we’re in to come to fruition – win or lose." That's the game in a nutshell.

Illiquid,

Yes that is the way I initially interpreted “short” but now we are on the same page


So I’m going to go down a road you’ve already stated you don’t much care for – but here it is anyway. Because I will submit if all other (external) framework is in proper order then the only other place to look is inward – if we’re to be at peace and find total freedom…


I agree with your assessment of the tape – meaning;

I agree the tape is what we deal with/ react to / trade, I agree it dictates how the game is played, I agree there is “gamesmanship” involved, and I agree we never know what’s coming next.

However as for trusting the tape – I neither trust or distrust it….


Instead I’ve turned inward and learned to trust myself completely… I trust what I am seeing; I trust that I will respond, and I trust I will always respond appropriately – given what I am seeing…

And yes I could armchair quarterback my decisions – after the fact – till I’m blue in the face – but I don’t… I do learn whatever lesson there is (many times there isn’t one) – then move on.

One, among the numerous, side benefits of solely trusting myself – it keeps the market completely out of my head.


I too trade discretionary, I too am never crystal clear how any trade will turn out, or what will happen next – but I am dead nuts certain what I will do – always.

I will add – this does NOT mean I view myself as 10 feet tall and bullet proof – nor does it mean I wake up every day feeling/ acting/ able to trade identical to every other day… In fact quite the opposite is true

I fully admit and accept I am only human – and I fully admit and accept I am absolutely subject to the same pitfalls, fallacies, imperfections, whatever every other human faces.

Interesting phenomena though, by accepting my limitations and trusting myself completely – I end up impervious to the market’s antics…

I do appreciate where you’re trying to go – however there is no external improvement that will get you there – imho

Ultimately your journal should bear out the facts – and if shown wrong guaranteed I’ll be the first to admit it


Anyway I know you’ve said you’re not much for the psychology mumbo jumbo… so feel free to tell me I’m full of crap

But like I said – if the external framework is solid – which in your case I’ve no doubt it is – then there’s only one other area left to improve


RN

 

[ammo]

you sound stubborn illiquid,that 's a double edge sword,it can keep you from getting shaken out, and also keep you adding to a losing position,you have to lose a lot of money to learn how to trade your way around this trait when wrong,, i guess it's worth it, if you can afford it ,awful expensive, RN is making a ton of sense

 

[illiquid]

Quote from Redneck trader:

However as for trusting the tape – I neither trust or distrust it….


Instead I’ve turned inward and learned to trust myself completely… I trust what I am seeing; I trust that I will respond, and I trust I will always respond appropriately – given what I am seeing…

And yes I could armchair quarterback my decisions – after the fact – till I’m blue in the face – but I don’t… I do learn whatever lesson there is (many times there isn’t one) – then move on.

One, among the numerous, side benefits of solely trusting myself – it keeps the market completely out of my head.


I too trade discretionary, I too am never crystal clear how any trade will turn out, or what will happen next – but I am dead nuts certain what I will do – always.

I will add – this does NOT mean I view myself as 10 feet tall and bullet proof – nor does it mean I wake up every day feeling/ acting/ able to trade identical to every other day… In fact quite the opposite is true

I fully admit and accept I am only human – and I fully admit and accept I am absolutely subject to the same pitfalls, fallacies, imperfections, whatever every other human faces.

Interesting phenomena though, by accepting my limitations and trusting myself completely – I end up impervious to the market’s antics…

I do appreciate where you’re trying to go – however there is no external improvement that will get you there – imho

Ultimately your journal should bear out the facts – and if shown wrong guaranteed I’ll be the first to admit it


Anyway I know you’ve said you’re not much for the psychology mumbo jumbo… so feel free to tell me I’m full of crap

But like I said – if the external framework is solid – which in your case I’ve no doubt it is – then there’s only one other area left to improve

RN

redneck,

I think what you are talking about here is psychological but by no means mumbo-jumbo -- and that is confidence in oneself as a trader. I can sense that confidence in yourself even as you acknowledge the market's innate uncertainty; this is the place where I want to be consistently as a trader.

I know my worst decisions always come when I stumble and lose faith in myself, if only temporarily. I know that I over-align my self-worth with the outcomes of my trades, with what the market may or may not happen to offer me at any given moment. It's no way to work consistently as a trader and no way to ultimately live one's life. I've always know this to be the one big flaw in myself no matter how much I manage to make; I've made success in this business my life's priority over nearly everything else, and it seems the price I paid to the markets was that very sense of self. I think this misplacement is the source of what makes trading harder than it needs to be for me. I shy away from the mechanical, the automated, the repetitive because I don't want to see myself as a robot -- when much of what good trading is is just executing one's plan day in, day out. *this is a new insight for me.

You mentioned that once you accepted your faults and limitations, the markets could not reach you -- I'd like to ask if you could clarify that further? Me, my faults as a trader are so repugnant to me that I feel I have no choice but to correct them, purge them, yet they remain in one form or another to show themselves at my worst moments. After all, how does one in this business accept being a gambler, a choker, an irresponsible child? In the worst light that is how I see myself. And given my past record, I don't trust myself -- I can't trust myself, the way things are now. It's something I can't fool myself into having. I've no choice but to earn it.

Sorry if this went off on a tangent (or rather the deep end?), it's all starting to sound a bit overdramatized. But hey, I do have the blotter to prove it

Hope i didn't scare you away RN - your thoughts are always welcome.

 

[illiquid]

Quote from ammo:

you sound stubborn illiquid,that 's a double edge sword,it can keep you from getting shaken out, and also keep you adding to a losing position,you have to lose a lot of money to learn how to trade your way around this trait when wrong,, i guess it's worth it, if you can afford it ,awful expensive, RN is making a ton of sense

Stubborn is a kind word, it's arrogance at the worst times to believe I could always afford it. And maybe I could, monetarily -- but it's cost me more than just market tuition, I've come to realize.

 

[coolweb]

sounds like you should post your entries, or talk on an instant messenger with an experienced pro, tell him where you are entering
watch when it backfires, and you look stupid in front of the pro
won't be doing that much anymore, unless you don't know your system or the markets.
has nothing to do with psych bs..
wrong understanding of the markets = wrong psychology. 9 out of 10 times yoi play.

---------
if I'm ever too bored for life and I happen to drop in
when you post your entries in real time, when I'm bored, I'll trade along with what you are trading.
You'll see your methods just completely wrong, It was never about your psych in the first place.

-----------

being surprised by the markets or lack of discipline is usually not "psych related"
Its lack of understanding of the markets. no joke

 

[Redneck]

Illiquid,

Impossible for you to go off tangent – it is your journal after all

And you have not gone off the deep end either – actually quite the contrary… You have made some deep and very insightful observations…


And to be sure you have not scared me away – we’re colleagues – we (you, me, every other trader) face the same crap the market dishes out every day - it helps to talk to others who can relate


I will respond – give me a little time to collect my thoughts and write it down – just no guarantees it’ll help though because we’re all different – but I’ll share them just the same

Good Trading Tomorrow Sir

RN