Change of heart

No trades today, just a lot of reading and thinking - oh yeah, and dreaming. Research for my dissertation didn't happen, and I had some bookwork to catch up with, but I got a little carried away with FNG. Some of this may not sound that well thought out, but I think it is important to catch the moment. Success, failure, or something unforeseen may change the environment next week.

I am pretty enthusiastic about my change in approach. But I admit - and my wife can readily attest, that I have been here before. Another flash in the pan? It seems different this time. These ideas have been tugging at me  over the course of the last 3 to 4 weeks, worked out practically and logistically this last week, and patted on the back today (via reading thru Scott's blog entries at FNG - here is my hands down favorite).

What's changed?

With the change in approach, I went thru some of my 'basis' posts to keep things in line with what is going on. I changed the entry/exit posts, but realized that I didn't have to change the content of the philosophy post at all, that is pretty much the same.

Interestingly enough, I mention in my philosophy that I think the market is impossible to predict, but then I proceeded to try and predict over the course of the last three months. I didn't think I was, but I was. Analysis wise, I thought I was all into probability, but I wasn't into probability at all, I was into making the market behave as I expected. I think I finally touched on it as I formalized my sell strategy. In retrospect, perhaps the biggest clue should have been the feeling of desperate hope that would accompany every decision to enter the market. Buy and pucker. Watch it go up, watch it go down, white knuckling the entire gut wrenching ride. That is no way to trade - or live for that matter.

The approach now feels more like I am relaxing on the sidelines, tuned into and trying to be very much aware of what is happening, and then when things look ripe, stepping in. If I happen to be wrong, then I quickly step out. If I am right, I hang on for the ride.

I can imagine a first reaction to this as - how is this different from predicting? Aren't you still trying to say what is going to happen? No. Rather I am 'listening' to the market, and letting the candles tell me what is happening. Candlestick patterns? Not really. Technical analysis? Not really - at least not in the traditional sense. It is more just going with the flow - the direction of least resistance as Livingston would put it.

This is a far cry from my previous approach - sticking with the strategy because it was tested and all the signs were in place, probability was on my side, and not hanging on for a little longer was the problem. I hated that even while I was in the middle of it. Without realizing, I was trying to bend the market to my will. Silly me.

Every trader is familiar with sharp, unexpected market moves. And when it moves, it can really move. Waiting to enter the market until this happens is what I am talking about. Try setting up a new high/low screener, and watch what happens to QQQQ as the screener lights up. Click on one of the new highs/lows and watch what it does. It is almost like magic. And incredibly freeing.

It is more like playing off the fear and greed of everyone else. Another Livingston staple. (but Livermore died broke - didn't he...)

It almost sounds like I have this figured out, which I assure everyone I don't. I have only caught a few real trades, have entered when I shouldn't have, and gotten out earlier than I should have. But in some sense, none of these decisions were wrong - I was 'listening', and I did exactly what I thought the market was telling me to do. I was mistaken, but I was still trying to heed the market, that is, to be in tune with it rather than trying to shove it around. It feels natural.

Well - I did do some wrong things - I had some logistic issues, I was not disciplined in thinking about and setting stop losses prior to entering, and entering markets without enough volatility (spread wise). And I accidentally clicked on the Bid when I was trying to buy twice (give me a break - they both begin with 'B'... thankfully I was paper trading.)

It will be interesting to see what happens (I say that a lot on this blog). A string of successes may ratchet up my greed - or a string of losses may ratchet up my fear. I don't know. Today I feel free to listen - and to be wrong - AND to be right.

So for the next few weeks, since the account value is now well below day trading minimums, I will trade for real when I can (and only when I get that tuned in feeling), and paper trades between real trades. I am tempted to stick more money in the account to bring it back above minimums, but at this point feel it is probably wiser not to.