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.
I was going to post another story about prices but today's action prompted me to share The PlayList as it is e-mailed out to members each day. The only change I made is adjusting SPY to long at 117 and short at 116 today when it became evident that the entries would not work without wreaking havoc.
I've been on a lookout for a day like today for what it seems like months now, but realistically as it inched nearer and nearer to the possibility. I've been sharing my view of the DJIA charts and positions and it is based on those charts that gaps and volatility can be gauged. Of course not always perfectly scripted, as I like to say, therefore there is a plan. It is following a plan that enables us to be comfortable in either cycle of the tape. We are in fact wearing a parachute in case the flying carpet is removed from under our butts in this ever evolving marketplace. So enjoy a rare free peak and thanks for reading and viewing.
Taking initial entries and maximum holds, today's action yields are as follows. These are based on ability to hold on to runs and exit on or near targets which is often a challenge for traders.
It has taken me a week to reflect on what I wrote in Part I of this article about Reed Hastings and NFLX in "The Right to Fail". I knew I had more to discover on the subject and more to express and as I went on a hunt through my mind about how it is we so often refuse to admit to failure especially since, on reflection, once we admit it, success begins to immediately flourish.
Recognition of something that does not work frees one to see another way. It also seems that the quicker we recognize the fact, the faster we are on the way toward another victory. Yet we seem to hold onto the hope that what does not work will somehow change its mind and start working if we only hang on for another little while; never "giving up", we say, while we apply every fix in our arsenal. But what if I told you that during that seeming indecision and endless hope, wait and prayer, we are already actually moving toward our next victory. What if we see that taking the time to apply our wits to fix, we are really working on success and it's perhaps what assures us success.
We know that all success stories have more forgotten failure stories, never written, and nobody says they have their failures to thank for their success, but shouldn't we? Doesn't success and failure go hand in hand and shouldn't it be given equal importance and weight?
I'll never forget watching my son learning to walk and I never thought I'd use it in an article. I actually wrote my observations down in a journal. To me it's burned into memory that each "failure" was met with another try and each try was met with success and a failure; and so the circle continued. Never was the joy wiped off my son's face or babbling stopped and there was no cry, just determination. In other words, each cycle was the same. Success and failure were both learning experiences of equal weight, without judgement of one or the other.
Perhaps we all have something to learn from that memory of ours as I'm sure we all had the experience of learning to walk. We automatically learn and apply adjustment to the next step as we fail; it's built into us. We're born with it all: ability to adjust, analyze and apply at the same time. Perhaps we need to reflect on that, somewhere along the way, we let someone else judge our success, and perhaps it's time to release that which misguided us and experience once again the joy that the cycle of failure and success brings. As we accept this cycle, the spiral of success expands and we need less of one in order for the other to continue, but we never really let go of failure 100% even in walking. Think of it next time you stumble or trip.
This is the concept that I teach in my trading. To put equal weight on both. Not to admonish oneself for the lack rather than to learn and move forward into the next trade with equal enthusiasm for the possible success. Realizing that if you cannot accept your failed trades with equal gratitude as your winning ones, you will fail more often. So, keep trying baby, keep on trading with joy!
Everyone has the right to fail. Failure is an essential part of growth and it is as natural as rain. I remembered that as I watched the video by Reed Hastings, CEO of Netflix. On the face of it, just the name "Qwikster" is wrought with problems, one of which the spelling. I went to by browser search and from memory I entered the company name. Unintentionally I misspelled the name by adding a "c" before "k" "qwickster" which prompted my search to ask if I meant "Quickster", taking me to an odd site with a twist on Spongebob Squarepants. It will result in not only guffaws but horrible results for searchers wishing to give an honest try to this Netflix offshoot.
Netflix is a brand that was understood easily .. "Net" meaning Internet and "Flix" meaning Movies an old slang for the term with a slight different spelling. But how are we to relate to Qwikster? Does it bring visions of smooth, fast, high quality streaming of games and movies? I cannot relate it to either. I can imagine the problem of finding a good name equivalent to Netflix, but in the least one must ask why change something that people already identify with.
If it is, as Reed Hastings says and I believe he's absolutely correct, that the streaming of games and movies is the future, then why not keep the brand name at least in part for the new company. Something with "flix" or "net" in it. "Netquix" "Myflix" "NetMyFlix" immediately come to mind. (But before I go on, be forewarned if you are tempted to rip off my ideas once reading this.)
The stream is full of frankly thoughtless criticism and some dumb remarks of one type or another but mainly about how he apologized because he lost billions. For one, Reed Hasting will not have lost billions yet but his investors have. Yes, anyone and their children who invested in his success. Further, it may be his reputation that is also lost which will make it more difficult for him to succeed in his next venture. But before you laugh hysterically, remember Steve Jobs. He too failed and was criticized: "NEXT"!
I have no idea what Reed Hastings was thinking as I believe that no person who has ever started a company goes into it with the thought that he will make billions in the first place. They start because of an idea that they want to see succeed. How much, is far away from the initial concept. It's been proven over and over again that true entrepreneurs put all of themselves into their concept out of love and it's because of that why they also have every right to destroy their creation as well. Would they do it intentionally, I doubt it, but their vision which started the concept, will have to be the one to develop it further.
Will his original fans be on board the new venture, one never knows. Individual investors will have to decide if Reed Hastings a "one trick pony" as is their right to do; but who amongst us has not taken the wrong fork in the road? And who amongst us large or small, has not in some way learned from that adventure only to come to a new horizon?
So,if Qwikster were to fail, will Reed Hastings be a failure? Somehow, I don't think so because people who have succeeded once know they can do it again. He will only take his place amongst the many who have failed, to possibly rise again. Keep it in mind as you read the "social" comments and articles full of criticism of this man's new concept, I ask of them, as I ask myself, when is the last time that we have tried enough to fail?... (to be continued)
So now Euro is saved. Monday, when I started writing this article it went like this: So the Euro is again on the brink of collapse, OH NO, change of news, saved again. Greece threatens to default nay, be saved once more and we, little folk, again have to grind our teeth in worry, or wait it's saved so grin with elation, grind in worry, grin in elation as the news keeps spinning round and round. If ever there was an orchestra out of tune, playing music while the dancers on the floor try to dance as if the tune had a tempo, this is it. Are we to dance fast to slow or slow to fast? What steps go with inept what can the dancers do to be heard by a conductor who's convinced it's the dancers who are uncoordinated? The fact that the orchestra cannot play coherently any longer is beyond anyone's acceptance. And, once more we have to ask the question, who is the conductor in this? Is is Germany, is it France are they all in it together?
Here are a few unvoiced "facts". The EU created what it's stepping in now by forcing the new entry countries to borrow from the EU in order for their own old currencies to become stronger. Only by meeting certain criteria by a certain deadline could the countries qualify for entrance into the fold. The countries in question were mostly former Soviet block and countries struggling to make it in this new western world and wished desperately to be accepted politically and nationally into the "free" world. Many of the former Soviet block nations were eager to join Europe for protection also which is a topic for another article but in short, by doing so, they created a false value for the EU. Remember when the Euro was strong? It was the result of the false value, as countries borrowed, they brought in "strength" in outlook of the interest rates to be collected on those loans.
Trouble is the other "fact" that played into this mess seldom mentioned is that those nations that borrowed also had to start selling assets in order to stay solvent and as foreign companies saw opportunity, it was not that hard to do. But by doing so, they sold off their ability to grow domestic products. The much needed the capital was for building long neglected infrastructures and to modernize companies which were not updated during the socialist/Soviet years. (An example about how well socialism works.
It is perhaps the easier to explain if you think of it in the same vain as what happened in USA with the housing market. When people were sold on the thought that in order to become prosperous, all they had to do is borrow and buy a house and with added emphasis that they should be able to borow and qualify for housing loan no matter what level of income they had. The housing inflation that ensued starting mid to late 1990's was the result and as more speculators jumped in, the bubble developed, the ponzi scheme grew. Well, you know the rest; when people cannot pay back loans, the house of cards collapses literally.
So, in summary, in order to join the EU, countries had to borrow to make their weak currencies strong and then when the currency started pouring in and become available, people were feeling a new found prosperity and they spent as promises of more followed but so did inflation with as much as 30% in some countries. It becomes impossible to collect enough revenue in order to pay off loans under those circumstances. So more money lent/borrowed/thrown into the economy. On the one hand people get used to prosperity, and the promise of more easy living and on the other hand, they see the value of what they have eroding. A bad arrangement for playing by any orchestra.
Finally adding to the problem is the Socialist mentality that is prevalent throughout Europe. People of the former Soviet bloc were not yet weened off the idea that Government should be their caretaker and since most of Europe is of like mind, it is not hard to imagine how the people will react when threatened by the loss of that "security". Socialist Democracy still relies of the Government to run the roost making it almost impossible to become independent and truly prosperous for the long run.
So, where will it end? Ultimately what worries me is the very thing that is happening which is the formation of another central bank. Just another layer growing on a stinking onion. In other words another ruling class functioning on the "needs" of the many. Artificiality continues, reality is hidden, collapse is inevitable. Therefore the ultimate question is: in whose lifetime will the orchestra finally stop playing? Shall we dance?
The best way to handle days that are confusing is to just watch. The players are playing but unless the music has a steady tempo, just listen. Dancing become impossible to a mixed up beat. The drummer may be out of sync, the lead violin may be out of tune and the orchestra may not be able to read music. Matters not what the reason is, if you jump on the dance floor, it's likely you will have sore toes.
Of course, the time spent watching is not without work. It is to help you see the possible moves coming up. Watch for trading ranges, patterns to set up. See if they become cohesive and become coordinated with a direction, if so, you can start planning your next dance.
Then, be sure to let the rhythm guide your trades, do not force the trade if it does not look right. There is no shame in sitting a dance out, and there is no shame in that if you find yourself on the floor and the timing is off, to gracefully walk off. In order for your trades to go well, you need to feel it, picture it, before you play it.
This is a reprint of an article written and published by me on February 8, 2008. No changes have been made except the addition of music. Anni
THE RELUCTANT TRADER
Ok so you may think this is about you. Don't you? A familiar tune? Surprise! It's about all of us. We all have days when we are reluctant. Everything shows up just fine all systems go yet we hold back. What's happening? What stops us from entering a trade?
I find that for me it's when I am not "upbeat"; my mood is lacking a certain "oomph". A positive note, figuratively and literally. It's when I don't listen to music, it's when I am too much into myself and listening to the old tapes; the ones inside my head. You know the ones, those negative critics we all have inside of us. Don't deny it you do too.
So what brings out the critic, that negative soul which loves to bring us down from a cloud! Is it a bad memory, is it the last bad trade, is it the news? Or is it something so ancient that we cannot quite find its origins; so familiar it becomes a security blanket of sort, a comfortable place of being because after all, if we are convinced that what we'll do will have a negative result, it's best to do nothing. So NOT entering a trade becomes positive or the right thing to do and that's where we get stuck and where the battle is fought.
Like with a Chinese puzzle the more we battle the more we get stuck. The battle so strong that it wears one out as well as wears one down. Negative thoughts build up fear which is a powerful force; so strong that many get paralyzed in it's grip and our critic uses fear well because it uses past mistakes to prove it's point. It becomes extraordinarily hard to find a positive note and if one is presented, it has to be proven inconsequential because when a position is taken, it has to be defended.
That is until I realize that I'm too busy fighting battle instead of thinking how wonderful it is that I have such a critic inside which looks out for my safety. My negative tapes stop playing real quickly when I stop the battle and acknowledge their validity in my life. I don't know about your critic but mine likes that compliment and feeling that it has accomplished its job, fades away letting me go on with living. It's because it's not the battle but life's flow which we seek, so acceptance of ourselves brings us back to the present where action can take place.
What happens after is in itself extraordinary. I notice sunshine, blue skies, and all of a sudden recognize familiar patterns on charts that have proven positive before and almost without effort, the trained eye hand coordination moves in for the kill. Rhythm back, what else is there to do but dance? So, I turn on the music.
I received the following letter recently from a reader and though I usually answer letters privately I felt that this question merited a public answer, as I know it's a struggle that troubles many traders and I was no exception.
Message*: Been reading your posts via Kirk Report. Your last several have been quite thought provoking. Stopped trading a month ago and have been doing some introspection regarding my trading abilities and lack of ability. Yesterday's post had a remark beginning with "growing cobwebs of indecision --- inevitable further loss." Your words nail the part of my trading self that really scares me as I do not see how to get past it. Really trying to figure out if in truth I can be any different when facing the screen than I have been recently. Thank you for putting into words what I am struggling with. Have you dealt with this? If so, how did you get past this. To note, I have a trading plan, rules etc. They turn to mush in movement of the day. J
Dear J,
First I wish to thank you for such honest introspection and thoughtful question as well as for your courage write about your struggle. Trading will bring us face to face with ourselves at the most inconvenient of times and what you are going through is exactly as you have recognized, a fear. Cobwebs of indecision set in when we have a fear of loss.
Most of us for one reason or another have trouble accepting loss. We are taught from an early age that losing anyone or anything is negative and it is usually associated with something we've done "wrong". Therefore our emotions are tied to loss on a very personal level. We all go through pangs of pain when a loss occurs, but the how long it takes to get over a loss depends on how much value we have put on the object or relationship we have lost. So, first I'd like to encourage you to list the losses you have suffered, or would hate to lose and put them in order of importance viewed from your feelings and not from what society may dictate.
Once your list is finished, you may recognize that your fears are stronger about losses you feel you don't have a chance to recover. We usually put money irrationally high on the list if not directly, indirectly by putting the most valuable items of our possessions there. But there is another reason; money is also closely tied to how we feel about ourselves. It's no wonder that money is so high on the list of what people want out of life.
Nothing brings this fear closer to scrutiny than trading. Trading allows for no mistakes and we learn that lesson very fast, therefore as we are suffering a loss by watching the price go opposite our position in a trade, the cobwebs of indecision set in, we lose muscle movement; the signals from the brain are so confusing that we cannot act or react. Also often, if we do get a jolt back to life we may act irrationally which makes the next experience even worse.
The ability to break out of this pattern is in all of us, yet it is not emphasized enough so it is not recognized easily when we are so entrenched in the fear of loss. What I am speaking of is that loss creates opportunity and we actually know it instinctively but in a frozen state of mind it's hard to act on. We know that loss is not a bad thing because it makes room for something new. This is reinforced everywhere in nature. Look around in nature without flowers dying we'd have no new blooms, without winter, no spring. Without loss of home, car, job or wallet; no lessons. Loss, when accepted, sets us into motion to do something that we may have not done before and we learn from each experience.
Trading through this struggle we find the solution to be in the action, not reaction or non-action. Remember that a body in motion tends to stay in motion, so if you practice what you have planned with each trade, the motion becomes fluid and natural and cannot freeze. Put your plan on automatic, in other words, set the stop loss order and profit order once you are in on a trade. The action forces discipline and reinforces trust. The more you experience that your planned strategy and rules work, the more trust you will place in them and consequently the more confidence you will gain in your ability to trade well.
