There and Back Again

How come I end up where I started?
How come I end up where I went wrong?
Won't take my eyes off the ball again . . .

-- Radiohead

What a long and strange trip this has been.

I cut my teeth in trading a decade ago as a "SOES bandit", where luck and a bubble market left me with a big head and no clue in the aftermath. Then I spent years in limbo trading futures: currencies, SIF's, bonds, metals, energy, etc., cycling extraordinary gains with even more dramatic blow-ups. I went to the edge this past year when I seriously questioned myself, whether or not I had learned anything of use over the years -- a trader who loses his confidence is a sorry sight indeed. But I suppose perseverance won out in the end, even though I'd be the first to admit that I continued forward because I really had no where else to go.

And now where am I? Back in stocks, trading prop of all things, where I guess I belong. I go home flat each day; no more "campaign" trading nor playing DIY hedge fund manager for this humble trader. I feel blessed enough to be excited every Monday morning for the start of each week. I get to even talk to other traders (like, real live people), and have my P/L pored over each day, instead of trading isolated at home, rationalizing god knows what in the dark. Most importantly, I'm glad to be able to say that all those years in front of the screen did not go to waste. Sure, I'm making one mistake after another as I plunge headlong back into the world of equities, but each time there's a calming familiarity, a lack of panic despite what goes wrong, like I've seen all this before. Discard the emotions, and the losses read like a textbook manual -- one page at a time. I'm optimistic.

A Fool's Tongue

There is a fine line between dedicated and addicted. Just a single letter in fact.

But will you sacrifice the world to prove you are one and not the other?

When both means and end are binged as one, all shall taste bittersweet thereafter.

The king is dead.

Long live the king.

Eyes Wide Shut

Why does it take so long for a trader to learn?

Like I've said before, I've seen as much so-called wisdom over the years that I've eventually learned to hold as inviolate truth, as that which should be thrown out with yesterday's garbage. Yet why does the eventual accumulation of pertinent knowledge translate so slowly into one's trading results? If we are capable of weeding out the good stuff from the bad, why doesn't the good stuff just take over and guide us directly towards success?

Aside from the fact that I might just be a dumbass, one thing I've figured out is that the distance between the brain and the finger might not be so close as you'd think -- if you're not careful. I know I'm not the only trader who has a tendency to repeat the usual mistakes, or variations of same, despite having berated myself 10 times in the previous week to make an effort not to do it again. My contention is that old habits die hard. Real hard. And only if you go out of your way to kill them outright.

Case in point: my stance towards major market moving news is that you have no reason to trade unless either a) you know what the report will be beforehand, and can accurately gauge the market reaction; or b) the risk/reward ratio is so skewed towards one direction that it's worth taking a chance. None of my setups are explicitly tailored for exploiting that generic spike in volatility. Yet why do I always find myself pumped up with adrenalin, finger on the trigger at 8:29 each and every first Friday morning of the month? Why am I always psyching myself up to do something -- anything -- just because I know there will a big move upcoming one way or another? I came to realize that this was a holdover from my stock trading days, when chasing volatility was the name of the game. But even as that game became extinct, I continued to instinctively adopt that "fight or flight" stance whenever potentially market moving events were impending, despite the fact that there was no justification for getting involved. By winding myself up into a mental and physical posture for spontaneous reaction in situations where nothing actually should be done, I was just begging to get myself into some sort of trouble. But until I took a step back (literally, way back) and saw how I was unconsciously placing myself in harms way for no good reason, that same bugaboo of "impulsive" trading just kept recurring with me none the wiser, nor richer.

Trader's Fortune Cookie

To hope is to admit all faith is lost.

Uprooted

Sorry for the lengthy absence since my last post, there's been alot more "shifting" going on than I ever expected, both in trading as well as personally. For one thing, I've relocated back into the Big Apple, where giving up the car in exchange for unlimited subway rides seems the best trade I've made so far this month. Although the floor space is half that of my prior apartment -- with my monitor currently sharing a small slice of the dining table -- it seems a waste to remain too long indoors no matter what the square footage, with the city just outside your doorstep. In fact, since the wife is in the market for a new laptop I'll be taking advantage of the increasing availability of wi-fi around various city parks -- it would be nice to get a change of scenery every once in a while even as I stare at the same quotes and charts each morning. Unlike my last stint in town where I relished my swanky digs but sadly ended up pretty much a hermit, I'm going to make it a point to get out and live beyond my "sleeping hole", and take advantage of what we're really paying for in terms of monthly rent.

I'm not sure as of yet, but I also believe this new atmosphere of "uprootedness" will give a fresh perspective to my relationship with trading and the markets. In this business, it's all too easy at times to let yourself become totally consumed by the "flickering ticks", and taking a step back once in a while to re-orient yourself never hurts. Already, the city has become this constant reminder that there's just so much more going on outside compared to the "drama" playing out on the screen and inside my head -- it's now just that much easier to power things down and set this crazy game aside when needed.

Shift

Recently, a fundamental shift occurred in my concept of what comprised an edge. My approach to finding opportunities began to rely more on the situational logic of any given moment, and less upon blanket, "incidental" setups. In other words, instead of just scanning the market passively and waiting for some pre-defined "pattern match" for a point of execution, any opportunity would now have its basis upon my understanding of the present (read: unique) impetus for market movement, and an accurate anticipation of where/when the next source of demand or supply would come from. Changes in market psychology would now comprise the elements of the setup-pattern, rather than just their visual manifestations on the charts, which are often a step or two behind in providing an entry point. The most glaring difference in the before/after would be the primacy of context over any rigid, abstract interpretation of market action; pattern XYZ might denote a "buy" today, but could just as easily convey a "sell" tomorrow.

Putting discretion at the forefront of my trading was no easy task, but was a necessary move considering the markets I trade. Any "rinse and repeat" setup can only last so long before it disappears beneath a glut of competitive forces. But this shift was not only a way to sharpen my edge or deepen my understanding of the markets; in my opinion, it was an indispensable step for achieving longevity as a trader. I promised myself I would never repeat the mistake of letting the markets outdate me, and this is the first step to ensuring my edge always remains sharp.

Intermission

When I look back on what I've posted here over the past year or so, I find as much that I still fervently believe in as that which I now completely reject. Some of the posts in the latter category simply leave me feeling sheepish; others elicit an urge for outright deletion. But to go back in effort to sift wheat from chaff feels dishonest in more ways than one. I really believe the false turns on a journey such as this are indistinguishable from the "correct" path; seeing the proper way is possible only when all the cul-de-sacs are methodically closed off after rigorous exploration and persistent cross-examination.

No short cuts here, not even in retrospect.