Life relates to trading and trading relates to life. Constantly revealing, unfolding before us as we trade and live, so I write about how my life relates to trading and how I trade the markets. Along the way I share my opinions on anything that evokes my passion or tickles my funny bone trying not to forget that enjoying life is the best part of living.
Continuing thoughts from yesterday about this game of wits we play, I remember that we not only need to have quick reactions we also need a quick memory. And coupled with quick memory, quick pattern recognition is an important ability for us traders.
Therefore, I thought I'll share with you the exercise that allows me to improve my abilities and be able to compete with the best of them:
Sometimes I am amazed about the topics that come into my mind to write about. Take yesterday's article. It is first draft and short, to the point. I was just about to add some of my embellishments when surprisingly the opening bell rang, and I decided to quickly publish it as it was written. I had no idea what was about to happen. It is why I have faith in a spirit much wiser than me, who somehow infuses into my psyche very timely topics. Usually I would not publish such a unrefined article, often regretting it later, yet something compelled me to just toss it up on my site. What happened next is, as everyone knows the morning "flash" crash of AAPL among others. Hence, my article today.
Trading is serious business. The purpose of this business is to earn money the hardest way possible: Intelligent guessing.
Trading is also a game; a game of wits. It requires agility, quick recognition of patterns and changes and quick reactions to what we see. Reactions do not necessarily mean action; it can mean, non-action. In other words holding back and not acting on the urgent instinct which is associated with fight or flight.
Yes, Fight or Flight is a very strong instinct and I think it's one of the hardest for traders to control when the unexpected happens. Case in point was Tuesday morning flash-crash of AAPL among others. The fight to hang onto shares or the flight to let got of them, if one holds the equity takes high psychological strength.
Equally it takes quick agility and clarity to jump in for us traders if we are ready to take advantage of the opportunity. Both however require what I call a sanity check. Reason has to be present and the quick assessment of possibility must be done. First and foremost the possibility of buying in and then the possibly suffering a reversal is in the frontal lobe of the mind. Emotions are high and a wrong move could become costly.
Inevitably if a trader is unsure, it's best to do nothing.. it's what stops are for. For the rest of the traders, or for those willing to take a high risk, the only question remains is how well they know patterns and how quickly can they recognize them.
When concentrating on the movement of the stock, allowing it to play out and show it's pattern, will give a trader more control and assurance of a gain. The knowledge that the panic selling will eventually end and that sanity will return is an experienced traders biggest asset, controlling at once the instinct to neither fight it nor run from it.
So you think all is rosy? OK Looking for value in the clouds, check the ground first. Usually it's closer to your feet. Value is measured with useful qualities not so much with wishful ones. Perhaps, soon enough, the reality will hit us again on this cloud we're riding.
I like soaring very much literally, and figuratively in these markets, so I am up there with some, and won't deny it, as long as the winds stay in my favor. But I keep checking for clear landing just in case. Parachute, well hope I won't need one,
There are days when breathers are nice. Days when the sheer steep is exhausting just to look at. Funny I don't remember feeling that way when I skied those, but I sure feel that way when I look at some of the setups for trading. That is why looking both ways before stepping off is paramount to keeping your capital safe.
Mapping a trade both ways allows for choice, allows for safety and give a trader an easier way to admit to being wrong. Knowing there is an opposite option to the trade already laid out also allows an easier way to tweak the trade when conditions change.
There is nothing wrong with caution because I am reminded of how easily conditions can change on the mountain and how fast a great day can turn into a perilous one. Same on the trading floor, within seconds things can take off or fall off and being conditioned for the change can mean life or trading death.
While taping todays afternoon tune, I was alerting traders to the tightness of AAPL and NFLX. It was still that way when I finished the tape, but while uploading, the NQ_F, AAPL, AMZN, NFLX almost simultaneously fell off the cliff that I just moment before was pointing to. If not for stops, you may have been caught in the avalanche, however short lived, avalanches are deadly. Events like these are good lessons, teaching us the age old rule, that in life as in nature, to always be ready for anything.
Instead of a tune today, watch this awesome pre-season ski clip. You won't be disappointed and it has a good tune. :)
Be afraid, but don't walk away. Traders should not be emotional while trading, but this message is not the kind of fear that should interrupt your reason, but the kind that should bring it front to your attention and spring you to action.
It's about what and how your fortunes are being manipulated. The dollar eroded, your ability to earn downgraded, goods restricted and inflation injected, this nation will find itself soon totally ineffectual as a power. Don't get me wrong, as a nation of warriors, we'll be useful but as a nation that can feed and clothe itself, we'll be helpless.
Through various subtle, some brazen, some under radar changes have been put into place and the web is so wide I doubt many could event distinguish it as one. the FOMC confirmed as much yesterday. Their manipulation has no end and it will never end. If you think gold will be safe, it's purchase is already on books to be regulated, registered and tracked and who's to say it will not be confiscated? It's happened many times before in world history that gold could not be owned by ordinary people.
Yes, be afraid and don't count on this election to solve the problem, A Congress that lets itself be used for the purpose of dis assembling the constitution will not be effective ever again. It's all about control and controlling you. Yes, be afraid, but face it and don't walk away!
Can you shoot the moon? BIDU? GOOG? Do a comparison which is a better buy? The choice is yours.
You want Tax cuts? Just extend the ones already in place. Why all the smoke by this administration? Because it's not a tax cut. It's a get out and vote gimmick and too late, once again, tax payers will realize?
Credits are not tax cuts, credits someone pays for: the tax payer to the non tax payer. Government ordered (Forced) compliance is not a benefit or a tax cut it's a Stalinist style extortion.
So the recession is over. What happened to the worst depression since the Great Depression? Is it still around? Why does the government have to tell you that you are doing better or worse?
The markets are rallying on new promises or new hope that the election will turn things around. Either way, you are gambling to shoot the moon.
It's not just computers need a refresh, we all do. Charts indicate it along the way whether in an uptrend or a downtrend. We call it consolidation, or a flag. It's when a stock just needs a breather where traders/investors watch for the next opportunity having perhaps taken the most out of the stock's movements. Of course once done, a breakout is more likely, so it's good to let an equity take a little time off.
(Ever wonder what the poor equity is feeling? Having been pecked this way and pecked the other, I bet the rest and refreshment feels good. ( big wink)) Anywho, you know what I mean.
In case you haven't noticed my writing has been a little sporadic lately and it's for good reason; I too am in need of consolidation, rest, refreshment for my next breakout. Truth is I'm working on a project and it's taking some of my writing time away and rather than turning out bad data every day, I prefer to keep things well inspired. Content and quality being important to me, I would rather write fewer articles for the time being.
This is not to say that I will not be writing at all only that I will not be writing daily. Of course if it's daily contact you'd like with me, come and join my trading room, where I spend most of my time presently.
As traders we tend to spend a lot of time with charts searching for the perfect trade and setting up trades from which we plan to reap profits. Despite all that time spent, often we only have a split second to execute our plan and sometimes that split second we may be spend frozen, watching the opportunity pass. Then, watching our planned on profit evaporate, not because it was a bad plan but because we chose not to hop aboard the ride when it hollered "All aboard!"
Do you do that?
For many of us traders everyday is like going to Disneyland. We arrive, full of anticipation where we wait in long lines often for a long time waiting for that special ride for which we planned, but when it's our turn to jump into the pod, we balk and back away, courage leaving our being. It's what I did on my last trip to Disneyland, where having time for one last ride, we ran to board Space Mountain and then, I backed away.
Have you done it?
One thing to remember at those times is not to blame ourselves for the hesitation, but to examine the reason for it. Trading much more than any other profession gives us opportunity to get to know and learn about ourselves. Therein is the real opportunity, because the knowledge will only help us grow and become more "whole" in our being. The trade and the Disneyland ride of our choice will be there for us to board again.
I just finished a short article on technology and logic when I realized that it really belonged on my other blog, so I posted it there. I am trying to stick to trading issues here, but at times it's difficult to separate life from trading, and that is the reason I titled this blog : Life relates to trading as trading relates to life.
My article is about our loss off logical thinking. We rely on technology now to do most of it for us and not only that, we now demand that we be protected from our own lack of knowledge or logic. I see it daily receiving endless "class action lawsuit" paperwork on equities that somehow went contrary to someones idea. To lawyers it seems it's like popping candy. An earnings miss by a company, or a misspoken word and the next thing we should think is that it was all done on purpose, we were all little sheep, mislead. Nowhere is it understood anymore that trading and/or investing is not guaranteed riches. Somehow it's all supposed to work like magic: when companies say the outlook is for .20 eps and it ends up to be .19, they deserve to be stripped of any future chance to make a profit. Law firms specializing in class actions, are somehow never questioned about their ulterior motives or subject to scrutiny.
Of course I don't begrudge anyone from making a living, but it's due to lack of logic that so much does go unchecked by ordinary citizens. Reality dictates, or is it logic, that anything we earn, any items we have can be lost and/or rendered worthless in relatively short time especially in today's world, yet no one is suing the companies for that. For example, Apple and the iPhone vs the new iPhone. Sony Walkman vs CDWalkman then iPods, DVDs and Blue Rays, one makes the other worthless (except for collectors) and the expensive items of yesterday (almost literally) have no worth today.
So, why expect your stocks to be worth anything, especially if you bought it last year? Even the FDIC is worth far less today than last year and that does not include the worth of your dollar or your real estate. So how about a class action lawsuit against the government for making our houses worth less? Oops, that dang logic I forgot I had is acting up again. :)
There was a rumbling sound, the earth shook; thought it was an earthquake and then Baaammm, a huge explosion; Looked outside and there was a fireball, heat so intense it melted glass.
So go the accounts of what happened last Thursday in a city south of San Francisco. When I first saw the flames I though an aircraft crashed on takeoff as that is a vector they use, but found out soon that it was a natural gas main that exploded.
Similar incidents happen around the same dates or so it seems. It's interesting that such an intense explosion happened just a couple of days prior to the 9/11 anniversary. This fireball, brought those memories back and put them sharply into focus once again. Realizing that even though years pass, the experience will always be stirred into reality by something similar.
It takes but an instance to change our lives and put things into focus that are much more important than what we usually focus on. This September 11th, pray once more for the families for whom it is still very much like it happened yesterday and please pray for those who have new horrifying memories.
Our lifetime is but a blink in the realm of the Universe, yet so precious, it's a blessing even if for just an instant.
There is a saying about teachers that I've at times thought true: " Those that can't do, teach" but I always took a slight offense at that, because it seemed to me an insult. After all, I speak English and I'm a teacher of English and I can dance, ski, drive etc. and have taught it. So mulling it over, I have finally concluded that maybe it really means, that vicariously doing is perhaps not as good as the real experience, but it's certainly better than not doing anything at all especially knowing that knowledge has it's own reward.
I have not read many books on the subject of trading methods because I tend to learn faster by doing and observing. Also, although I prefer not to re-invent the wheel, I prefer to test my own skills at puzzles. Someone once called it an "inventor mentality", which too can be construed as an insult, I suppose because not all inventors come up with brilliant creations. Nevertheless, I have developed my own method of trading which I now teach.
In my opinion teaching teaches not only the student but also the teacher. It's probably why I enjoy doing it the most. Not to be narcissistic about it but it allows me to be my own student. Even if not true, it's a good excuse for learning because teaching challenges self to learn more not only to keep ahead of the students but also to define to students the very essence of an idea.
Teaching my trading method puts all dimensions of my abilities to the test as I have to define what I have developed over the years, naturally. Something that I live and breathe daily now have to be encapsulated into words that seem at times elusive. Yet what I find as I keep to the task is that it's teaching me to be even more focused, observent about how I do my business. So doing, I'm "fine tuning" myself to be a better trader, so in the end, I can say "yes I can, can" do both.
Wondering how honest we are. We demand honesty from our governors but tend to wink when they are not honest as if it's known that they will lie. Then may I ask, why do we elect anyone in the first place and once elected, why do we re-elect them?
Amusing or not, honesty would be refreshing, but when people speak frankly, we ridicule them, at best, as fools. So if we don't get honesty, we have to look ourselves in the mirror and ask, do we really want to accept an honest opinion.
Many traders have this issue facing them every day. Honesty about the trades entered, honesty about how to treat those trades, and honesty about the feelings which surround the question. It's easy to be honest when things go right but it's a different matter when things go against the direction we picked.
A good way to remedy the situation is to have a mirror by your desk and look yourself in the eye once in a while. Ask if the trade you are troubled with is one that you really wish to tell everyone about? (Go ahead, Tweet it) Even before the question fully crosses your mind, you know the honest answer and you already know what to do next.
The mirror will help you face the truth simply, this way, no smoke factor is needed. The more honest you are with yourself, the more you help this Universe become honest. Demanding honesty is easier when we know we deserve it, but we can only accept it when we can face it.
Charts are important to all traders and all traders have different views on the matter at hand for each second that the markets are open. After which charters start again to do their charting work for the next day. There are thousands of charts out there and a thousand more each minute of uptime on the web. They are available from just about every trader willing to post one.
The problem is, or perhaps it's not, that if everyone traded the same chart the same way, all the mistery and the money making in the markets would be a snap and frankly a total bore. Let's face it if we could all make money on the markets following charts, it should be a piece of cake. Which it's not. Thank goodness.
Charts can help you follow the stock it does not help you to make good judgements and mostly they look in the past with a few exceptions however they also can tell the future which some can spot but most cannot.
Which laborer scenario would you choose as a worker? One that will allow you to excel given your input and talent or one that will allow you to be like everyone else and get paid for what you and they do, as you go?
Behind the labor movement, I think that is the most encompassing question. I have no doubt that mankind, who are not allowed to excel, will not reach their potential and I have no doubt that there are those who do not care, but maybe because they don't truly understand what labor is.
Truth is we are all laborers: be it those who work for ourselves or those who work for others. Labor is at the core of making any business viable. A business cannot survive without the output of hard work and I can bet you that every mom and pop or large corporation, looking far enough back to it's beginnings will have at the core, themselves as hard working laborers. The trouble is, that the media, be it in books, or documentary form, tend to concentrate on their big success and not the steps it took to achieve it. They tend to gloss over the hard days, the days that it takes every ounce of will to continue the labor and the quest for success.
Labor produces; be it on a farm, in a factory or at a desk. I labor every day doing what I do and I bet everyone does who puts in a minute of time into what they earn money with. Even the homeless who stand at freeway on ramps and exits with their sign do labor. But labor does not equate to money and those that have told you it does or should, have done a great disfavor to most.
The truth is that labor earns, but it does not always earn money. It can earn food for a farmer/gardener, it can earn the product for a inventor/fixer, it can earn audience for an entertainer, but does that mean they will be able to go to the bank with it? NO. Does it mean that all labor is rewarded by riches? NO. Does it mean that all who labor should be paid? NO.
That last one will probably raise shackles with many, but perhaps they miss the point. Labor is done for itself or better put, for the laborer, because there are two things we all earn in doing our labor: survival and satisfaction. Two very powerful motivators. A mother and teacher labors for their children. The entrepreneur labors over developing an idea. People all over the world labor daily for the food they eat if they are lucky. Some labor to sell their goods for return of money, but the labor is not paid in that case, it's the product that the labor produces which is what earns the money. All done for survival and satisfaction.
This is where most Unions and Socialists miss the mark. They tell you equal pay for equal work, which at the base is impossible, but even if it were true, human beings compete at every level of existence, and what they offer is a homogenized version of self, where pocketbook may be satisfied but not the soul. Is it not why workers measure everything by their earnings rather than their achievements? Do people go to work with them to earn money or to earn satisfaction?
And therein lies again the reason why all laborers are at the core, capitalists. We all, every one of us, after all that hard labor wish to get the most for what we produce, and rather than pitting one against the other, laborer vs owner, it's time to realize we are all doing the same thing and wishing to achieve the same goal: Success at the level of satisfaction which only our own labor of love can receive.
Summer days stretching into another favorite time of year. Autumn leaves, crisp air, sun lower on the horizon casting shadows that are longer.
Except it's been hotter than blazes since the first. Indian Summer, as it's know in California, is yet again blazing. It's good for the grapes in the valleys since so far it's been fairly cool, and a friend asks, please don't pray for rain until after harvest.
Looking like it's also good for the markets or at least good until Labor Day weekend, which is now, so I guess September days won't really kick in until we have our picnic. Have a great day, and weekend,Remember it's Friday, opex day so be weary of the chop, drop and lift.
