Too often people out trade / over trade themselves — and usually into losses… It’s not the market that beats them, its themselves! I have learned that myself in the past, but I am borrowing knowledge from Jesse Livermore as he is quoted in his unofficial biography Reminiscence of a Stock Operator.
“The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.”
PATIENCE. DISCIPLINE. THE ABILITY TO BE COMFORTABLE WITH DOING NOTHING, AND USUALLY WAITING FOR “IT” TO PLAY OUT. — I am reading this newer version of Reminiscence of a Stock Operator, and I can’t help but relate almost every famous quote, or even the random stories, to some of my own. Clearly I am not swinging nor experiencing the identical moments described in the book, but I have my own versions throughout my own career thus far. *Anyways, the point of this quote is to “Stay in the game, — to live to trade another day, and to catch (profit from) your convictions”, which I talk about so often here.
We are trading Futures, the name is giving it away, focus on the future. While we manage risk in the present time, and it matters right now — the game is designed looking forward, where will we (and your risk) be in 5 min, 10 min, a day or so? It is less about being right “immediately” and more about figuring out “how can I manage this position based on my bias for that particular product”. — I wanted the stock market to rally last week, I thought we would bottom, and I could leverage up the position into the end of that week, but the market doesn’t care about me, so it was my job to figure out, “how do I stay in?” Since this is the way I set myself up, I would have loved it Friday, but I will not complain about getting the second best day of the year for stocks a session late. I am still in.. *So today I was long ES, and I knew my risk as I had owned the outright future ES, and front month 1895 put, (which I rolled up to 1925 strike), basically long synthetic calls (long deltas in ES). — I wanted to buy when we were low, which I did, and I can manage my risk accordingly throughout the entire trade, that being said, this is risk capital, and if I am wrong, I am willing to lose what I can there based on the strikes and outrights.
More importantly, I didn’t miss the move in Copper today. This is the move I have been waiting for. The Doctor (Dr. Copper) was finally resilient to the upside — we had the best day of the year for HG and we are still at “low levels” for recent time. IMO – being able to lean on the strength in copper, made it “easier” for me to trade Crude, ES, Gold, and risk/commodity currencies like CAD/AUD/NZD.
The key is, to not bust yourSELF out of the trade, stay in the game! Live to trade another day, — this is only possible if you learn from your mistakes and continue to sharpen your skills, always, constantly. The future markets are more Darwinian than they have been in a long time again, volatility is creeping back in, we have extreme rate rumors, and even the best traders/hedgers/banks in the world are “re-tooling” their approaches in the Futures Market. Make sure to continue to adapt with it, and keep yourself in the trades you BELIEVE IN. This way, when the bottom or top, or continuation you have been waiting for begins to blast off, — you aren’t stuck chasing alpha (and reporting old news/prices) with all the other Monday morning Quarterbacks, or in this case Tuesday Morning QB’s.
Manage your risk, and wait – let the market WORK for you.
Still waiting in Crude / Gold. In the meantime, I am sitting back and letting the MARKET work for ME.
Let’s try again tomorrow. – Happy Trading.
-Bret Rosenthal