Sunday, March 05, 2006

Fickle trading

"I’d say the biggest mistake I see from the average reader is that people seem to think a long-term trading approach can fit on top of an itchy day trader’s finger. That takes discipline to learn. And that, for some people, takes a lifetime." -- Bill Cara link

One of the most puzzling paradoxes of trading is that you have to show up every day, but most days your best move is to do nothing.

I don't day trade, but I do look at a lot of time horizons, sometimes as short as 1 minute bars. But I've learned to focus my attention on shorter time horizons only when longer time horizons are at a critical juncture. My trading life became much simpler when just owning a stock was no longer a reason to look at a shorter time horizon than daily bars. I don't even load up the quote streamer until I've made the decision to buy or sell a stock that day based on daily and weekly charts.

It can be more optimal to trade extremely short time horizons, but the benefits of trading very short term don't scale linearly due to transaction costs becoming more difficult to beat. For me, it is important to not have to grind for every dollar. I don't want a full time job from the markets, but I do want to make high returns on my money, so I consistently reform my trading to be in line with these goals.

I start off every campaign in a stock very fickle, weak handed. As a position works for me and I pyramid into a larger position, I become a strong hand; I'm dug in. This blog is titled "fickle trader", which at first seems like it would clash with Bill's statement above, but I'd like to think that I've struck a balance and found the discipline to make it work.


At 9:05 AM, Blogger Rafitax said...

This is one of fundamental rules...
I remember sometimes that I trade only because I was bored...and of course I lost money.

Great Blog...
Sorry about my english. I promise improve.

At 2:37 PM, Anonymous Anonymous said...

After trading for the past 4 years, the one thing that has improved my trading greatly... mostly daytrading, is holding back and waiting for the stock to come to me, instead of chasing... and making fewer trades with higher return potential. And many days that means not pulling the trigger on any trades.

At 6:05 PM, Blogger TraderEyal said...

Yep totally agree with your first paragraph. I wish I had started doing that long time ago.

At 10:10 AM, Blogger Mr. MFEMFEM said...

Take a look at COR...let it pull back from here but the company has a lot of potential I think.

At 1:09 PM, Blogger Matt Norris said...

Great info, as usual.

FYI, Jon, I updated my mortgage blog, finally. Going to try to stay committed to posting in this thing once per day, again.

Hope you're doing well. I'll give you a call sometime this week.

At 9:23 AM, Anonymous Grant said...

Good post Jon. I'm enjoying reading your blog, as your trading style seems to fall in line with my own.

Like you, I learned very quickly that the best strategy on most trading days is to do nothing at all.

I'll continue to check in regularly!



Post a Comment

<< Home