So here goes…
I couldn’t think of any particular topic to write about, so I figured I would just dictate this post as a written recording of my stream of consciousness. Initially, I planned to write a view paragraphs based on how I trade, but then I realized that there is nothing I could tell you that you haven’t heard before. During my time talking with, and observing, other discretionary intraday traders, I’ve found that there are only two main strategies… you’re either a trend-follower or mean-reversion trader (I don’t know anyone who has figured out how to make pair-trading work intraday). For you to make money as a day trader, the price of the market has to change, there is no other way around that… we’re not making markets here… Now that isn’t to say that every once in a while a trader that specializing in mean-reversion won’t buy into a strong market, or a momentum trader won’t sell a blade-up, but in general, every trader makes the bulk of his money in the strategy that he/she specializes in. As I think back, Trader D and Trader B both had all their best days ever on days where the market had a large reversal. My best days (as a trend-follower) all occurred when the market opened weak and finished weaker, or opened strong, and finished stronger. I am a momentum junkie, and there is nothing I love more than buying something going straight up, or selling something going straight down. It is what comes naturally to me.
Of more interest, may be how I came to this point. Just as many behavioral tendencies and subconscious habits can be traced to childhood experiences/influences, I believe my market directional trading bias has its links to the beginning of my trading career.
To briefly summarize my beginnings, I got my Series 7 in winter 2006, and promptly proceeded to lose money from the last couple weeks in December, through March of 2007. I smoked myself for the entire 3k deposit amount and then some. At the end of March, I wired in the last bit of money I had to bring my negative account into the green, but by then I had already pretty much figured I was done. Then April 2007 came. This marked the first earnings season that I was aware of. I managed to make a good amount of money buying earnings stocks making highs, pyramiding into more as they ripped. April 2007 was my first positive month. I made around 4k (which was huge to me), about enough to cover my losses up until that point. Buying into momentum was my first very positive reinforcement by the market, and I think that was so ingrained into me that I start to feel very uncomfortable whenever I’m fading or in a retracement trade.
Over time, I’ve made adjustments to execution details such as entry/exit timing, trading vehicles, profit targets, etc, but at its core, I am nothing more than a trend follower. I know my strengths and weaknesses. All the traders I know, that make a killing, are the best at what they do. I can’t make more money than Trader Z trading his style. If I’m doing my job right, no one will make more money than me, trading my style. And that’s what it comes down to, acknowledging and accentuating your strengths, and minimizing your weaknesses. If there is one point I would stress in this rambling post, it is the value of become more self-aware professionally, understand your tendencies and proficiencies, then to develop a strategy to maximize on that. One of my favorite quotes comes from market wizard Mark Minervini,
"Concentrate on mastering one style that suits your personality, which is a lifetime process. Most people just cannot weather the learning curve. As soon as it gets difficult, and their approach isn't working up to their expectations, they begin to look for something else. As a result, they become slightly efficient in many areas without ever becoming very good in any single methodology. The reality is that it takes a very long time to develop a superior approach, and along the way, you are going to go through periods when you do poorly. Ironically, those are the periods that give you the most valuable information."
So there you have it… stick to what you’re good at, and most passionate about, because that is what you’ll be best at. Don’t let the money drive you crazy because this shit will mean nothing in 100 years. Maintain perspective, love your family, live fearless