Trading longer time frames

Hi,

There are many, many good points made during this thread; I'll try to add another.

It's not just a matter of finding a trading style that matches your personality (which is very important); it's also critical to find a trading style that captures your strengths.

In working with traders from prop shops to investment banks, I've found that their skill sets are quite, quite different. The high frequency prop traders have amazing skills in the area of working (short-term) memory and rapid processing of information. Their ability to recognize patterns and act upon them quickly is amazing.

Conversely, the longer time-frame traders often found in hedge funds and banks tend to possess greater analytical skills. Many times, they work from explicit research, models, or systems. Much of what they're good at is synthesizing large amounts of information, finding themes, and exploiting those over time.

It is very, very rare in my experience for traders to be equally adept at both kinds of trading. One is highly intuitive and action oriented; the other is reasoned and methodical. When traders combine these styles (as I do), it's often by doing the analytical work outside of market hours and then using it as an edge during those periods of reading the tape.

Our cognitive skills and our personalities help to shape the kind of trading we gravitate to--and can be good at.

Brett
 
Thanks; here's one way I tried to frame the issue: Success Builds on Current Success

http://www.brettsteenbarger.com/trader_performance.htm#Success Builds on Current Success

Here's yet another framing:

http://traderfeed.blogspot.com/2006/11/solution-focused-trading.html

Because I'm a psychologist, people come to me focused on their problems and weaknesses: what they're doing wrong.

What they don't realize is that working on a deficit will only make you average.

It's building upon distinctive strengths that generates greatness and overshadows weakness.

But to build on who we are and seek what we can become takes a kind of courage not often discussed in trading circles. It's easier in some ways to fret about our failings than to close our eyes and dream:

http://traderfeed.blogspot.com/2006/11/greatness-is-summoning-strength-of.html

My best wishes and deepest respect for those who strive to become Elite Traders--

Brett
 
personally, i trade intraday index futures scalps for income.

but... i LOVE trading (or in many cases, INVESTING) on a longer time frame.

what i have found is that in longer time frame, there are some great edges to be found in fundamentals, that obviously don't exist when intraday scalping index futures.

iow, the longer the time frame, the less i pay attention to price action, and the more i pay attention to fundies. and i am not talking (mostly) #'s. i am talking about a more lynchian approach.

perfect examples were CROX, HANS, and UARM.
 
Thanks for the comment on the book. It was my attempt to explain how some traders became ultra successful and why others fell considerably short. I'm in the minority among trading psych types: I don't think that psychology is the key to trading success. Like other performance fields, trading first requires talents and skills--and an arena of opportunity that makes use of those. There are too many trading "education" websites and conferences out there and not enough resources for training, IMO. My hope with the book was to get people to think of themselves as professionals in training, not as gamblers looking for the quick score and magic bullet.

Brett
 
Quote from candeo:

Cashmoney,

Please look at the charts I talked about. Take AAPL for the last 2-3 years and look at the strategy I talked about. Look at SPY, NVDA, CELG, just pick one. In fact MAs have been scientifically proven as the most efficient trading strategy. Saying "they always work in trending markets" does not make much sense. How do you define "trending markets"? What time frame do you use? What period for your MA? Yes, you would sit through periods when nothing happens, but that's the whole point of my post. Being patient. Yes, you would get churned if you pick a period for your MA that is too short, but if you take the weekly chart and use a 10 or 20 MA, it won't happen much. It seems to me that you would still be much more profitable than by trading it every 2-3 days or every hour. About earnings? I don't understand this question. Nobody can predict earnings, news etc..If earnings are bad, then stock will drop below its MA and you are out. If you were already in puts, then it's all profits. I think it's Dave Landry who said that anyway, if you follow the trend, earnings and news will go your way. It's funny how we think that by trading shorter time frames, by being more active, by using more indicators, we can control the market better and things like earnings. And if you can't take the stress of earnings plays, don't play them. Sit-out and re-enter later. I am not saying that you should just buy and hold, but use your skills as a trader on a longer time frame.
More...

Thanks for credit on that one. I'm sure I'm not the first to say that surprises generally happen in the direction of the trend.

Regarding longer-term time frames, I have become more longer-term oriented in more recent years.

Maybe its a mauturity thing (which my wife will argue) and I'm not trying to capture each and every zig and zag--i.e. I'm willing to hold on for a "bigger picture" move. More likely though, its that the volatility has compressed-- you have to hold positions longer nowadays (we all remember the go-go days when it was nothing to get 10-20 points in a stock in 1 day?!).

I now give positions room and time to work. My biggest regret is that I put the quote "when in doubt, get out" in my first book. That's the first thing I'll change in the next edition.

I still enter positions with my short-term patterns (email me if you need a primer) BUT.... hopefully, through money management, I am able to stay with the position for a longer-term trend.

Dave
 
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