tale of the tape

This post is a bit disjointed but it is a description of what happened yesterday and some current thoughts I have.

This is what I observed yesterday:

I used to sometimes look at my charts at the start of the day and know I missed a huge move in the Asian and early European sessions. I had to adjust my thinking to get away from regret for missing a move because the markets are made to move so new setups are developing all the time. I was just getting used to days with a nice Initial Balance and it took off on a trend day like a rocket. Yesterday it seemed like a never ending rally but I waited it out, did not trade the open and stayed out of the middle until a set up developed. The long side seemed crowded and a mania was developing but it continued as any mania does. I stabbed short at the top but it spiked higher. The vertical move looked unsustainable so I stabbed again and it paid off in small measures. I counted the dollars and took it too soon. I planned my trade and traded my plan. Controlling the greed comes once you have started to control the fear.

My position for a lot of this week was on the sidelines. I did not trade much Wednesday because of the Euro news. Thursday’s melt up seemed overdone by the time I saw it or so I thought. I did not want to buy or sell so I stayed flat and did some homework and made some observations. I was reading that you have to learn to trade in every kind of market: A bull run, a bear market crash, an uptrend in a bear market, a downtrend in a bull market, news driven markets. One benefit of being a day trader is that you don’t have to trade all the time. Trading all the time generates stress and losses for me and commission for my broker. Futures trading is not a zero sum game, in fact a negative sum game:

Futures trading is often referred to as a Zero Sum Game, however, it is actually a Negative Sum Game.

If you look at the gross results of the transactions for a particular symbol during a give time period then the sum of the gains and losses for all traders will be zero. However, each trader will incur trading costs and this will reduce the profits from the wining trades and exacerbate the losses.

Costs such as software, hardware, commissions, subscriptions etc. are essential expenses when trading. They do, however, turn a theoretically Zero Sum Game into a Negative Sum Game.

As an analogy to this you can think of Texas Hold-em poker. Again this is a theoretically Zero Sum Game as the total amount of money that the players walk away from the table with is the same as what they arrived with. However, if you play this at a table in a casino then the casino will take a rake for each hand played. This means that the total money the players leave with will be less than what they arrived with.

mypivots.com:

I like this song, I listened to it after I closed a winning trade yesterday. Some of the lyrics can be used to compare to the psychology involved in trading. I am not looking for anyone to literally share a dollar with me although some gave me knowledge to save my dollars by knowing what to look for.

I need a dollar dollar, a dollar is what I need
hey hey
Well I need a dollar dollar, a dollar is what I need
hey hey
And I said I need dollar dollar, a dollar is what I need
And if I share with you my story would you share your dollar with me

Bad times are comin and I reap what I don’t sow
hey hey
Well let me tell you somthin all that glitters ain’t gold
hey hey
It’s been a long old trouble long old troublesome road
And I’m looking for somebody come and help me carry this load

Bridge:
I need a dollar dollar, a dollar is what I need
hey hey
Well I need a dollar dollar, a dollar is what I need
Well I don’t know if I’m walking on solid ground
Cause everything around me is falling down
And all I want – is for someone – to help me

If you have to make money then you wont. You have to find a way to sit there patiently. The following phrase rings true: “we are all heroes looking at the left of the chart” and it is true, hindsight is 20/20. The other side is the Hard Right and it is futile to strive for certainty.

Advertisements

2 thoughts on “tale of the tape

  1. “The vertical move looked unsustainable”. I guess many shorts were thinking this yesterday, lol.

    I watched but did not short yesterday at all and later decided to turn off my trading platfom. The EU summit is potentially a game changer and I did not want to stand in the way of a news-based OTF train. My approach is based around support and resistance and this type of days is very dangerous for this approach. Volume was above median throughout the entire session so the extreme range was not so surprising imho.

    Like you I spend a lot of time on the sidelines these days. Sometimes it’s the best thing to do. Good post!

    • thanks Benko – glad you like what I write.

      My only trade today was a long based on a hold of the Open Swing Low and a nice 50% scale for 4 points. At present it is struggling to get above 1278-1279 which was resistance pre close yesterday and support during the close – target is the cash close. I will let it play out and play some battlefield I think.

      Too much chopping around and changing my mind has been bad for me in the past. Inability to accept a small loss was annoying which pointed to too large a position. I made some nice returns on some days over the last months but drawdown days were brutal and one bad day of frustration and revenge trading would wipe out 3-4 days gains. I could not continue like this and reduced my stakes to attempt consistent profitability instead of going back to paper trading.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s