Persona

After identifying, analyzing, and classifying my edge, I thought it would be a simple thing to finally answer the question: What kind of trader am I? For to succeed in the markets, I needed to know exactly what I was bringing to the table each and every morning without question, in order to trade with confidence. Yet breaking down the elements of what constituted my edge revealed a contradiction that needed to be resolved before I could properly move forward.

As I noted in my previous post, I'd categorized my performance according to time frame, ranging from intraday setups to position trades lasting weeks at a time. Overall, I'd found that cumulatively my biggest source of losses came from spur of the moment trades, while the most profitable ones lasted at least a few days and were pre-planned relatively well in advance. So naturally I began shying away from pulling the trigger on any "Intraday" category trade, while concentrating my efforts on looking for the next "big" move. But as I shifted to a longer mindset and paid less attention to the tick-by-tick gyrations, I became increasingly aware of the pitfalls of the longer-term. Holding a position and having a pre-determined opinion colored my objectivity; although I was doing less trading on an intraday basis, there were still premium signals in the short-term that I would end up ignoring if the direction went counter to my overnight position. I was becoming slow and reluctant in acknowledging and incorporating information that contradicted my bias, and I found myself fighting the markets more and more often as they continued to move against "scenarios" I'd developed and grown attached to mentally -- a very costly habit!

I'd thought the longer term was the "correct" time frame for me, yet my results began to betray that assumption. I started to miss the mental freedom of being a purely short-term opportunist, not having to worry whether or not my stops would be hit overnight on some meaningless spike or bracing for how the next economic number would roil my account equity. But wasn't I right in refraining from trading off the short-term flickering ticks, given my past performance? Coming in flat every morning and looking for opportunities off the cuff made me "trigger-happy" as I tried to make each day count; the tendency became to push alot of trades yet each with little conviction, exposing myself to frequent second-guessing and trading for frustration's sake. In contrast, position trading taught me patience in both selectivity of trades as well as profit-taking, yet I'd sacrificed the objectivity needed for instantaneous reaction that is the advantage of having "no opinion".

This dilemma between two contrasting styles became my obsession over these past few weeks, as I became aware that the only thing I was certain of was the absolute need to resolve this question of trading persona. Both sides had their advantages and disadvantages in regards to my abilities and mental tendencies -- the more I racked my brain over it, the more impossible it became to decide. But something finally dawned on me as I pored over my trading results over the last several months. As I oscillated between the two poles in my trading, the further I swung towards one end, the more disproportionate the negatives of that approach would become. It suddenly became clear to me that this was not an either/or decision; instead, I realized the necessity in incorporating both approaches in order to capitalize on the advantages while simultaneously minimizing the disadvantages. I needed the sensitivity of the tape and a finger on the intraday pulse to properly glean the next major pivot and find the optimum entry point; I needed the longer term outlook to keep proper perspective in distinguishing day-to-day signal from noise, and to keep a higher level of selectivity on my short-term transactions. Most importantly, I had to maintain that freedom of opinion and quickness of action at all times, despite whatever I may be holding or have anticipated to occur, for having freedom from one's own opinion is the definition of the ideal market opportunist.