Skip to main content

Trading Performance: Getting To That Next Level

I recently spoke with the traders at SMB and shared a few best practices that had benefited my trading over the past several months.  The idea is not that any traders should mimic my trading; rather, traders need to learn from their successes, identify what they are doing well, and then become more consistent in implementing those strengths.

Here are a few of my trading performance observations that might spark some thought for your trading:

1)  My profitability has improved since I've focused on consistency rather than profitability.  I've honed in on what are good trades for me and where my profits have come from.  I just want to be consistent in trading those good trades.  If I can do that, the profitability will come.  And if I want greater profitability, I should size up the good trades, not take other, more marginal trades.

2)  A corollary of the above is that my best trading has been highly selective trading.  There are days and series of days when I don't place a trade.  I'm fine with that.  My aim is not to trade; my aim is to make money.

3)  The amount of time I spend staring at screens is not correlated with my profitability.  If you're a high frequency trader, you need to track each tick in the market.  If you're not a high frequency trader and you're staring at each tick in the market, you're either lacking confidence in your trade or you're sized too large and taking too much risk.  When I'm in a good trade, I can walk away for a while.

4)  I've found my own way of making sense of markets.  I think in terms of cycles, not trends.  (See above). When I assess shorter-term cycles, it's over event time, not chronological time.  When I look at volatility, it's by comparing the volatility priced into options versus the volatility recently realized in price action.  All of these are ways of thinking about markets that I've studied and that make sense to me.  I don't know how to have staying power in a trade if it's not an idea that makes deep sense.

5)  I've studied the trajectory of my profitable and unprofitable trades.  Many of the trades I enter will anticipate a market move following a period of compressed volatility.  I generally anticipate the ramping up of volatility pretty well.  If it ramps in the wrong direction, my trade goes wrong relatively quickly.  By entering the trade with a small core position, I ensure that a losing trade won't be a large trade.  If the volatility moves in my expected direction, I can use bounces against the move to add to the position.  I don't add to losing trades and I'm quick to take profits opportunistically on added pieces of trades.  Sound money management has been the best form of psychological management.

6)  One of my best predictors of making money is having fun with markets.  I have fun when I develop new tools, generate new ideas, and see them work in practice.  If I focus too much on making money or not losing money, all the fun goes away from trading.  That's when I'm likely to make bad decisions.  If I'm having fun with markets, I don't need to trade.  If I need to trade, I don't have fun with markets.  

7)  I'm best when I specialize.  I trade one thing and one thing only, the ES futures.  I study high frequency data on stocks (upticks/downticks, patterns of very short-term price and volume behavior); I study unusual measures of market breadth; I study cycles of various market sectors; etc.  I don't trade different individual stocks and I don't trade other asset classes.  My goal is to be a product specialist, not a trading generalist.  That has helped greatly in my pattern recognition.  If I were to look at different stocks and markets each day, I would not build up the database of patterns I would need to recognize opportunities.    

The big idea here is that getting to that next level of trading performance requires self-awareness.  You need to know what you're good at, what speaks to you, and where your successes come from.  You get to the next level, not by changing who you are, but by distilling the essence of who you are and becoming ever better in leveraging that.  

Further Reading:  Our Struggles Develop Our Strengths
.

Comments

Post a Comment

Popular posts from this blog

Austerity-A Fancy Word for Destitute.

The reason for this post is not for the folks who have been caught in the first wave of personal economic hard reality, but the next wave. Regardless of the optimism espoused by grinning leaders and sycophant press, we are entering the final stage of global economic collapse. It began in 2008 and was forestalled for five years with fudge putty, but the weight of global indebtedness cannot be propped any longer and the final crunch is imminent. Austerity measures herald the final throes.  Indications of coming austerity.   Austerity measures are the final last ditch effort, futile or not! Back in the day many of us old-timers went through periods of "hard-times". In retrospect I realize there is no comparison to yesteryear hard times and today's version. Back then, expectations were never very high for the working class, there were no sophisticated systems or conveniences anyway. In fact the difference between being "set" or not was about having treats or not. Si...
Post a Comment
Read more

Terrifying Arctic methane levels

A peak methane level of 3026 ppb was recorded by the MetOp-B satellite at 469 mb on December 11, 2021 am. This follows a peak methane level of  3644 ppb  recorded by the MetOp-B satellite at 367 mb on November 21, 2021, pm. A peak methane level of 2716 ppb was recorded by the MetOp-B satellite at 586 mb on December 11, 2021, pm, as above image shows. This image is possibly even more terrifying than the image at the top, as above image shows that at 586 mb, i.e. much closer to sea level, almost all methane shows up over sea, rather than over land, supporting the possibility of large methane eruptions from the seafloor, especially in the Arctic.  Also, the image was recorded later than the image at the top with the 3026 ppb peak, indicating that even more methane may be on the way. This appears to be confirmed by the Copernicus forecast for December 12, 2021, 03 UTC, as illustrated by the image below, which shows methane at 500 hPa (equivalent to 500 mb). Furthermore, ...
Post a Comment
Read more

Women and children overboard

It's the  Catch-22  of clinical trials: to protect pregnant women and children from the risks of untested drugs....we don't test drugs adequately for them. In the last few decades , we've been more concerned about the harms of research than of inadequately tested treatments for everyone, in fact. But for "vulnerable populations,"  like pregnant women and children, the default was to exclude them. And just in case any women might be, or might become, pregnant, it was often easier just to exclude us all from trials. It got so bad, that by the late 1990s, the FDA realized regulations and more for pregnant women - and women generally - had to change. The NIH (National Institutes of Health) took action too. And so few drugs had enough safety and efficacy information for children that, even in official circles, children were being called "therapeutic orphans."  Action began on that, too. There is still a long way to go. But this month there was a sign that ...
Post a Comment
Read more