Bottoms Up

Ever since I started trading, I've always aspired to one day playing the macro game. Currencies, bonds, commodities, and equities -- all pieces in the grand puzzle that challenges hedge fund managers and central bankers alike. But not surprisingly, trading alone in one's own living room doesn't exactly provide the ideal vantage point for learning how one takes part in that game, to put it mildly. Sure, part of the intellectual reward from trading is watching the pieces of the puzzle fall into place in real-time/dollars and seeing how the theory actually connects with reality; but let's face it, the vast majority of us cannot even be certain which of the pieces are in play to begin with. Although it's important to have at least some handle on the elements of a market the major players are currently focused upon, an individual trader has only one venue of feedback that he can reliably trust, and that's price. Whatever we might hypothesize about the impetus behind a market move can rarely if ever be proven; at best, explanations are revealed only in retrospect after the opportunity for profit has long gone cold. But the tape remains the one equalizer for all market players, and we can at least appreciate the fact that most of the time we're privy to hitting and lifting the same bids and offers as our bigger competitors in the know.

Given the above, I've come to adopt a certain philosophy behind looking for opportunities which can be summed up as follows: Shoot first, ask questions later -- if any. Rather than using a "top-down" approach of presuming a scenario and then looking for/forcing an entry in that direction, I now readily take any position in either direction whenever a satisfactory entry point presents itself, without any consideration for the whys or wherefores beforehand. The advantages behind the "blind" approach are twofold as one's flexibility becomes optimized: an increase in the number of available opportunities, and a much nimbler stance when it comes to the cutting of losses. Although the satisfaction of puzzle-solving will always be part of the allure of trading, I must embrace the fact that seeking the theoretical solution and making money are often conflicting endeavors when dealing with zero-sum discounting mechanisms.