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Old 03-27-2002, 07:45 PM
Posts: n/a
Default that\'s like saying move up after a week at 3-6

First of all, you made a common error by extending your position duration on the day after you got chopped up. In other words, you learned too quickly that, hey, if you hold on long enough, it comes back. Both this, and your contract size, I cautioned you on yesterday in my unsolicited opinions. You can reduce the number of trades without hanging on longer. You don't need a huge edge to make a living, only like a half point per trade, twice a week.

The next thing is the news. The floor guys no longer have any visibility, but the big dealers in New York still have some visibility when it comes to news events. In hopes to "catch" the news, their customers tell them in advance whether they are going to be trying to buy or sell stock depending on the news, and so the big desks get an idea of what the possible outcomes are, and then start loading up in the pit (possibly because it would be unethical to front-run clients directly in the cash market).

When it it is choppy, meaning when it is nothing but traders running the market in one direction and the other, you have to speed up, not slow down. See, the correct trade for me yesterday afternoon would have been super-fast trading, by selling short as soon as the down blip gained momentum, and assuming the traders would wash themselves completely down, and back up. The "fishing wavelength" is the number of traders, meaning the size of the move they expect. So you ride the gradual entry, exit, and reversal, of frontrunners, who are trading for a longer timeframe than you are trading for.

The reason I went long yesterday is because, in the event of an uptrend, all the up-trend followers riding it should have gotten washed out by 1142. So, if there is an uptrend, I get the double whammy of the resumed uptrend, plus all the uptrend traders getting stopped back in. If no underlying demand materializes, and instead the market just keeps trying to digest the stopping out of the uptrend traders, it could trigger them to go the whole way to entering on the downside - which is what happened - but I am safe, because although the extent of the down move will be unpredictable, it will have to reverse itself. And this is based on my estimation that there may or may not be buyers, but there are not sellers.

So it was a tough gamble. I could either gamble on there being buyers, and the uptrend traders getting washed back in, or I could gamble on there being no underlying buyers or sellers, and the trend traders washing themselves in and out both ways, in two complete waves. The reason I decided on the underlying uptrend was because if I was wrong I would break even, but if I traded the downtrend and it stalled, I could get chopped up, or killed if the uptrend materialized. And I was bullish, and I decided to rely on that rather then the traders being overwhelming enough to whipsaw themselves.

Today looked like worthless crap from the get-go and, other than shooting for a full-day uptrend, I'm not sure how else you could have played it. There weren't enough trades chasing it to create their own waves, and correctly so, because there weren't enough underlying buyers or sellers to really move it. What nastiness at the close!

The only other error you made was your silence yesterday. When you didn't post, I knew you had gotten killed. You can't act differently when you win and when you lose. You can't even tell your wife when you win and when you lose, because on the days you lose she'll freak out and dump you, and on the days you win she'll buy plane tickets to Paris. So if you only tell her on the days you win, you'll go broke, so you can't tell her anything. And this only happens when you have condfidence whether you'll win or lose over the long run, and that only happens when you adjust your strategy slowly over long periods of wins and losses, rather than celebrating then quitting.

In conclusion, today could have been a trend day, and you were lucky it came back. You had no reason to believe anybody would be dumb enough to get stuck long, or that it would chop around on a wide wavelentgh. Notice, the wavelength was narrower today, and that runup was the real deal, it held. In summary, I mistook yesterday for today, you mistook yesterday for Monday, and you mistook today for yesterday. Or something like that...

Just don't "learn quick," rather, assume other people do. Assume other people are making the mistakes you made, and fighting yesterday's battle.

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