An interesting post from Implicit Trading takes a look at a question that is too rarely posed: When is there *not* opportunity for your trading style?
A little while back, I conducted a review of my greatest winning and losing trades. What I found was that the winning trades, though intraday, tended to ride weakness that showed up day over day, particularly among "overbought" markets and strength that manifested day over day following "oversold" conditions.
The greatest losing trades occurred when I saw an intraday pattern of strength or weakness that was not confirmed by what the market was doing day over day. As a result, the strength turned out to be but a bounce in a falling market; the weakness was a dip in a rising market.
Where this has led me is to a much greater selectivity in my trading: only trading intraday setups when the larger picture is also setting up my way. This keeps me out of markets a good deal of the time, but it also helps me be more aggressive with the higher probability ideas.
Discipline, after all, is not just the ability to control one's trading, but the ability to control whether or not one trades.
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2 comments:
I like to call it the background of the market.
Quoted from Steidlmayer:
"In the early days of Market Profile, the background of the trade always handled the lull period, by reassuring us that longer-term direction, and hence the collective dominance, was in our favor. Lulls always induced activity of an opposite nature and needed to be looked upon with perspective. The perspective or background we had at that time came from the type of day classification system, Which had its strength in having evolved from the floor liquidity. For example, a normal variation day had more dominance than a normal day, and the fact it could evolve meant that the background would not just disappear but would at least hold on. Trades were not made in isolation but as a part of this background. Background was, and remains, an essential part of market discipline".
I actually discuss this concept today in my video in regards to why one has absolutely no reason to be short as this market (as of 1pmEST) just yet. The background of the market allows one to contextually examine what data in the foreground is relevant and what should be ignored.
-Matt Fahmie
When I was an option floor trader we HAD to trade to make markets. Our positions tended to be the opposite of the income orders. Because of the advantages of being on the floor there was a lot of money to be made.
With electronic trading, commissions are lower, access is easier and everyone has a more level playing field. So how can an independent trader make money?
Their advantage is they don't have to trade. They can select when they are in the markets. To support what is being said, I believe this is the KEY advantage of independent traders.
If a trader sees him/herself as a trader who must be trading, they are putting themselves in the role of the floor trader who HAS to trade, but without the advantages.
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