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Neil:
Well, I already got one reply privately telling me to keep my psychology to
myself. If my comments offended anyone, so be it. My comments weren't meant as
psychology.
Phil Nixon's idea is just fine. I don't have that indicator on my screen, but
that's a great idea and one I'll put in my arsenal. Although I do keep a
spreadsheet open on my desk that has current ATR's of all the commodities I
trade, as well a historical high and low of the ATR for each commodity for a
reference point.
Someone [I think TJ] said that people trading single contracts in the S&Ps
should just not trade on days like yesterday. 95 percent of the people that read
this won't like hearing that. I know most people aren't sitting on large margin
accounts. I really do understand how difficult it is to make money trading from
a small account. I also know there are some really talented traders that for one
reason or another only have a small account. And there are also some people with
small accounts that will get their margin calls and be gone from trading. Sadly,
that's what happens to many people, the majority, that try to trade actively.
I did trade yesterday. I had my best profit day of the month. I had a full long
position on in the bonds and ten years overnight coming into Thursday and I was
small short the SPs. I think it was TJ again that said that on wild days, it is
most stressful trading profitably. I agree. Somehow, taking a loss is a closing
for me. When I take the loss, I move on. Riding a winner has all sorts of
emotions that you have to fight if you want to stay with your plan.
When I walked into my trading room, just after the bond opening, I was
scratching my head at the huge spike high I had missed on the opening. I saw the
SPs down 10 or whatever they were and picked up the phone and asked my bond
broker in the pits what was going on. You could hear the tension in his voice.
So I guess the opening prices and action were my first clue, the sound of my
broker's voice was my second clue. I had no interest in adding to my bond
position, so I updated my hand charts in bonds and ten years and entered some
limit profit orders. I scaled out one third before noon and another third on the
run up during Project A right before dinner.
After putting in my bond orders [profit orders AND S/L orders], I updated my SP
charts. I saw the 1055 level, like everyone else, and decided that if I wanted
to add, I had to add with a break down through there. I expected any S/L sale
there would have ALOT of skid. So I went and got coffee and tried to think, away
from the screens and prices.
I was thinking: Gonna be alot of slippage in whatever I do. I have a nice
winner, do I want to screw around with adding in this slop? I was only a
fraction of my normal trade size, so I decided I did want to add. I decided I
would pick a point to sell and after adding, I would place a S/L above that add
to close out the whole position. I looked at the charts at the many daily lows
in descending order and decided that a break below 1059-1058 would lead to a
large downside break[I thought the sloppiness of the market and the panic would
push the market through 1055 IF we got to 1059] and so that's where I put my
order to add.
When we got near the opening, I called my SP floor guy. He sounded 10 times
worse than my bond guy and hadn't filled a trade yet. He said everyone but me
had asked to be on the phone for the opening. We both thought we were in for a
wild day. I gave him my order [ an entry order to add and S/L order for my whole
position] and then I let him go deal with people that wanted to be on the phone.
The most important thing is recognizing market conditions and then adjusting
accordingly. Even when I gave my broker an order to double my SP position, I was
only trading a little less than half what I might carry on a 'normal' day. That
was not the case with the bonds and ten years, but those psoitions were several
days old and I was snugging my stops on those. But even on the bonds/ten years,
my first instinct yesterday was cutting my exposure-I was afraid we might not
get a huge down day in the SPs and the bonds might be wild to the downside as
people ran out of the 'safe haven' trade.
I finished the day flat in the SPs and with 1/3 the bond and ten year exposure.
I won't trade the SPs today. If they go lower, I won't have come in with a
runing start and I expect it will again be a difficult execution day. I am happy
with what I did yesterday. If it rallies, it might be just as crazy. I traded
with the trend yesterday, and I am not interested in fading a trend on days like
yesterday. I know many people made some money yesterday being long. But IF I
choose to trade on days with volatility like yesterday, I only want to trade
with the trend. I think that's where the most likely money will be made.
So, short summary: I trade with the trend. I look at the volatility or range of
the market and evaluate the market conditions. If it is too wild and I don't
have a clear idea with easy stop/profit places, I pass. If I do have positions
coming into a day that is wild, my first thought is how can I reduce my
exposure?
And last, I double and triple check everything. I checked out with my SP broker
three times during the day and once again after the close. Same with my bond
broker. I have traded through the same broker for 19 years now and I have never
once had an outtrade. I actually had a price problem yesterday that we caught
during the trading day: They reported a fill to me selling bonds at 126 21 and I
had put the order as sell at 12620. They went back to the other side of the
trade and we changed it to 12620. At the end of the day, they came back and gave
it to me at 12621. We all agreed we wouldn't be surprised if it was reported on
my sheets in the morning at 12620. My brokers called me twice to check out
during the day. I know it sounds anal. But anything you can do to cut down on
mistakes makes sense. It's too damn hard to make money to give it back on a
mistake.
I hope that answered some questions for some people. I also sincerely hope that
everyone here survived yesterday and is having a good trading day today. We all
deserve the weekend off.
Best,
Tim Morge
Neil Harrington wrote:
>
> Tim,
>
> Good comments from you, as usual. Thanks. I have some questions about some
> of your comments below...
>
> | -----Original Message-----
> | From: Timothy Morge [mailto:tmorge@xxxxxxxxxxxxxxx]
> | Sent: Thursday, August 27, 1998 8:41 PM
> | To: The Funkhousers
> | Cc: Nchrisc@xxxxxxx; omega-list@xxxxxxxxxx
> | Subject: Re: CME Class Action
> |
> | <SNIP>
>
> | And the
> | guys that want to
> | trade every day can't just make the wise decision to just
> | not trade today.
> <SNIP>
> | At least we, as off-floor traders can look and say: No
> | thanks. Not today. Too
> | crazy.
> |
>
> How and when do you decide the market is too crazy and to not trade today?
> What I am inferring from your comments is that you watch the market for x
> period of time, see something that looks crazy in your trading time frame
> (ATR too large, etc.), then decide not to trade "today". Please elaborate on
> this...
>
> | <SNIP>
>
> | So, my advice, for what it's worth, is to take some personal
> | responsibility for
> | making the decisions you made today: You chose to trade in
> | 'the market from
> | hell,' you traded against the trend and against the
> | volatilty, and your backups
> | were not adequate.
>
> Similarly, how and when during the day do you decide this is a market from
> hell, and thus decide not to trade today.
>
> <SNIP>
>
> But
> | don't forget to evaluate your own part in this: Did you do
> | your job today?
>
> In essense, as an experienced day trader, how would you advise people to
> evaluate whether or not to trade on a given day. You may have deeper pockets
> than many on the list, so please couch your reply in terms of an account
> that trades 1 contract.
>
> Thanks again for your comments and any insights you might give by replying
> to this message.
>
> Neil
>
> |
> | Best,
> |
> | Tim Morge
> |
|