Kudos to Kirk for these two posts today. Now that Brett is MIA, Kirk is going to be my main daily blog view. I think that one trusted view is enough per day to enhance one's own daily process. No CNBC crappola for this trader. Although I do like the CNBC iphone app.
Everything You Know Is Wrong
Everything You Know Is Wrong
I had a beloved professor in law school who would say that it is important to have a good forgettory. In other words, he thought it was an distinct advantage to have forgotten what you have already learned so that you'd be forced when the time came to relearn and think about problems from a completely fresh perspective.
His point was that experienced lawyers, especially the more lazy ones, are often at distinct disadvantage to the inexperienced because they make constant assumptions on what the law was which would get them into serious trouble in the court room. Although all of his students wondered if it was really true, the professor said that he lost many cases after an inexperienced lawyer was better prepared.
As things change, experience can sometimes work to your disadvantage especially if you're not keeping and adjusting to the environment around you. I've talked previously about the importance of gaining experience, but there is a point where experience can also work against you.
Take for example a trader in my mentoring program at the moment. He has over 25 years of experience trading full-time, but struggling tremendously with the market primarily because he hasn't adjusted his strategies and mental perspective enough to account for program-related trading. Although I won't go into specifics of why and how this is in order to keep his trust and confidentiality, I will say this - the primary issue he has is that he constantly makes bold assumptions based on lessons learned long ago as they relate to the market and refuses to adjust or consider other things.
Contrast this situation with another student in my mentorship group who is relatively new (just over 3 years of part-time experience & now moving full-time) that looks at the market in a way that is constantly fresh and always evolving. (He has even taught me a few things!) You know what? The newbie trader is killing it (currently up triple digits on the year) even though old graybeards like me say that should never happen!
The reason I think for that is that the newbie is not fighting this market with past scars and hard-learned lessons. Instead he is simply trading upon the price action alone and managing his risk in a way that he knows what he always must do even amid uncertainty. In other words, what he doesn't know, isn't hurting him unlike those of us who are more experienced. It is so weird how that happens, but I've seen this before and among the more experienced traders who I've been privileged work with.
So, the point here is that if you're having trouble as a more experienced and skilled trader AND you have suspicion it may be directly related to old perspectives and information, don't be afraid to step back, break the mold you've created for yourself, and try new things. The best way to do that in my view is to constantly work on new trading strategies that force you outside of your comfort zone and which require you to constantly examine what you do in a different ways. This will also enable you, as my beloved law professor said, to have a good forgettory. And, that can serve you well as markets change and evolve.
As we get set for tomorrow’s open, I have a few random thoughts to share…
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The safest trade right now? A huge full-court spin that will attempt to avert wide-scale panic by everyone with a vested interest in making sure people don’t pull money out of the market
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Already chatter of canceled trades making the rounds. How nice for those folks – I wasn’t able to execute any of my trades even though I did my best
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If this was a fat finger, it was a mighty big one. I saw billions of sell orders flash before my very own eyes within a six minute time-span
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Let’s now all assume it was a “trading error” today. Now, then ask yourself this question – how “safe” is our money if one bad trade can take down the whole market?
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At the moment you can rest assure everyone managing other people’s money is being instructed to “tighten up their risk parameters” to avoid being caught leaning the wrong way if we see further price deterioration
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Days like today definitely should be considered “emperor has no clothes” as the dark underbelly of high-frequency trading wreaks utter havoc. In my opinion, this is only a small sign of things to come our way
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Is someone on Wall Street trying to send Congress a message on financial reform? Perhaps only coincidental, but I don’t personally believe in coincidences as far as Wall Street is concerned
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After the market closed I sat down to figure out how how much money staying disciplined with my ATR stop sell stops saved me this week. You don’t want to know how much, but it was in the six figures
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Research is on going, but as Mr. Goepfert reports tonight – “it would be very unusual if today’s spike marked the end of the selling pressure” as “in every case the S&P was lower two weeks later by an average of 2.3%.”
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Here’s the problem with historical research – if we’ve learned anything of late we’re no longer in a “usual” market. If we were, today “should” have never happened
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If anyone tells you they bought this bottom, you know they’re lying. Every trader I know was locked out or could not get existing buy orders to fill IF they had any of them. I did, and not a single trade was filled.
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If anyone tells you they covered their shorts at the bottom, you know they’re lying. I was also trying to cover some shorts and was locked out. When they did finally execute, it was at significantly higher prices.
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Hey, here’s some good news – at least expectations are pretty low going into tomorrow’s jobs report!
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Typically, you want to fade a jobs report gappper. Just saying.
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Another piece of good news – the weekly ATR for the S&P held on today’s close. Without any doubt, it will be very important to see us hold above it by the end of trading tomorrow
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Over half the stock screen machine stocks are now under confirmed sell signals
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All the same, looks like we received price confirmation on the RMO sell signal last week
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What levels should we watch now? Any true snapper should be able to cut through S&P 1,180 (now the short-term downtrend line – see chart above)
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It’s been awhile since we’ve had to review the NYSE circuit-breaker levels
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In battle mode, the worst thing you can do is start watching more TV and getting more “expert” opinions about the market to latch on to. Resist this temptation.
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Traders who feel the need to “run to momma” when the pressure is on are destined to always underperform. Plan your trade and work your plan just like it is a normal day
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Ask yourself – what is the hardest trade out there for you? Then, think about taking it, of course, with stops in case you’re proven wrong
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Uncertainty and perception rules markets more than fundamentals in the short-term. This rule never changes
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Get some extra exercise tonight and go to bed at least 1 hour earlier than normal. Tomorrow has the potential to be even more interesting than today
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