December 31st marked the one-year anniversary of this blog.
I thought for sure I would be trading profitably by now. Not to be.
But - I have learned a lot. Last year started with TDA, holy grails, backtesting, and swing trades and some $14k more in assets.
The Christmas break was good. Cold, snowy, skiing, firewood, extended family and good friends... and closed road delays on the way home. A good, clear-the-air break from trading.
But... I didn't manage to stay completely away from trading. I actually spent quite a bit of time thinking about the last year, what I had learned, and how my understanding of trading has changed. I have been exposed to a lot of information, tried plenty of experiments, had some very good trading days and some ridiculously bad trading days (unfortunately more of the latter), and run thru the associated emotional gamuts.
The question of course is, what distinguished the winning days from the losing days last year?
Let's think about this.
To state the obvious, there are only two things that can happen with price: the price can go up or the price can go down.
Ok.
The price goes up. A trade is registered on the exchange. DTN IQ's servers relay the data to my CPU and my CPU sends it to a pretty chart on my screen. The photons pass thru the monitor's glass, race thru the air and into my retina.
That is all that can happen.
Now - I respond... and either my response is meaningless and trading is a right-place-at-the-right-time dumb luck activity - or - simple up and down becomes either ripe or convoluted with meaning and intention: the product of the market's fear and hope... or the catalyst for my own.
I still think the second scenario is the valid one.
We spent some time as a family skiing. It has been two years for me and I spent most of the time with son #3 on the bunny slope teaching/reminding him of the basics (everyone else snowboards). It was a rewarding time. After a bit my wife and I swapped and I got a few good runs in. I stuck to the groomed, and as I tried out my (out of shape) legs, I began to remember how incredible and fun skiing is. The human body is quite amazing. As I am skiing, my body is accepting and responding to an incredible amount of information: varying snow conditions, varying slope, varying physical aptitude; all across a broad spectrum of sensory input: vision, hearing, and touch (within the classic '5'). Say the skiis hit a patch of ice. Somehow this is sensed and my body responds and adjusts. Say packed snow becomes powder, my body senses, responds and adjusts.
(Imagine what it would take to get a computer/robot to respond to a ski slope...)
I think that for trading to be 'good', it should be something like 'skiing'.
Take any type of activity: driving, sports, video games - even relationships. A person's ability to respond to his/her environment - even without being able to quantify exactly what it is that is happening - is amazing.
I think that when I am at my best in trading, I am simply in the moment and responding to what is happening. When I am at my worst, I am thinking too much; trying to be too technical; trying to make something happen. I think that good trading is as organic as feeling the snow thru my skiis, boots, socks, and tired legs; as organic as feeling how a 3 and a half ton Sequoia is responding to snowy, curvy road conditions; as organic as me sensing and knowing what kind of a mood my wife is in. When I try to figure these things out, I focus on the quantifiable, the 'art' - and the beauty and fun - is lost; I also tend to choke.
This is what I want to bring to my trading for the new year. I am going to mentally adopt and practice putting on the focused/fun/feel-y mode of thinking; starting by trying to be in the moment and letting my body/mind respond to what it is sensing. Putting on my 'skis' and letting my body do what it wants to do. What is happening? Am I being reckless? Am I safe? Am I ready?
As I finish this post, I can't help but notice the simplicity inherent in trading and my attempts to control the uncontrollable. I see the need to let the market be what it is and to work on adapting my response to what is. I am not quite sure how to come to grips with all this, but I tend to think the most important aspect of all this is to make my success at trading less important/critical, and giving myself the permission to learn (i.e., make mistakes).
Trade well.
All the best.
very nice senor, welcome back
ReplyDeleteSounds like you are still hard at it my friend. Happy new years and best of luck in the new year
ReplyDeleteLucas
You have a great and deep thought process. Generally this is a nice quality to have, however in trading too much thinking and not enough listening so to speak will not get you to the successful side of it.
ReplyDeleteYour comparisons to skiing and driving are rooted in your reaction to predictable physical conditions. Laws of nature are absolute and snow and ice will always react the same, time after time. Trading is an arena driven by human emotions where no two minutes are identical. A trader can only go with probabilities in order to prosper. Nothing is absolute. Nothing is predictable with 100% certainty. I preach over and over to go with the flow. I listen when the markets say to get in or out. The markets really do tell you what to do if you are prepared to listen and act.
Developing your 6th sense, intuition, takes time. You are just starting out so you can't expect to master the market just as I wouldn't expect to be able to learn to play Beethovens 9th symphony in a year. Think about how much you have progressed during the year. The learning grows exponentially until that 6th sense kicks in and you can stay in the zone for hours at a time. Mark my words - what you think you know now is nothing compared to what you will know next year or 5 years down the road, about the markets and yourself. And therein lies the key - when you master yourself, trading becomes the simple thing you thought it was when you first looked at it.