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3/26/25 - Quick shout-out: TraderLion is coming out with a book published by Harriman House detailing the process of finding your edge in markets. It is so important to understand markets in ways that make sense to you; only then can you have the confidence to take meaningful risk and sustain your risk-taking. What has worked for me is a lining up of time frames, where I look at my markets (stock index futures) on three different time frames. As I've mentioned previously, the X-axis actually isn't time; each bar on the chart represents an amount of volume traded. So the short-term chart has bars representing relatively few contracts traded; the medium-term chart has bars representing a moderate number of contracts traded; and the longer-term chart has bars representing open-high-low-close for a large number of contracts traded. The charts thus adjust to the busyness of the market. I overlay the same technical indicators on the three charts and wait for signals across all three. I then turn to my very short-term chart of the NYSE TICK to time my entry, looking for occasions when buying/selling are drying up and reversing. I'm comfortable taking sizable risk when everything lines up, and I'm comfortable not trading when signals are mixed. As a very bright and creative money manager taught me, so much of success comes from not needing to trade.
3/25/25 - Yet another key to trading success: The ability to recognize, in real time, when your market is lining up for an unusually good potential opportunity and then to be able to size up for that opportunity without losing sight of sound risk management. Selective aggression is all about being willing and able to wait for the right opportunities and, when those arrive, being able to pounce decisively. Very often, a meaningful part of overall profitability for discretionary traders comes from a relative handful of trading opportunities. A key to great trading is being able to outline--in detail--the criteria for a true A+ opportunity and then having the discipline to wait for those criteria to be met and being able to go from waiting to pouncing. In my next post, I will outline the high opportunity criteria that guide my largest trading.
3/24/25 - Here is another key to great trading: understanding market context. Reading the "text" of the market--the short-term patterns that set up--is crucial to good risk/reward entries and exits, but what tells you the "context" of market action? Is this setting up as a trend day? Are we seeing a rotational day? Who is in the market; how busy are we and how far could we move? How does today's market fit into the pattern of recent trading? Is there a theme driving trading across asset classes? Who is setting up to be trapped: Are buyers and sellers moving price effectively, or are we seeing signs of exhaustion?
Great trading comes from looking beyond the market and time frame we're trading to see the bigger picture that will be driving price action. The microscope helps us get the best price for our orders; the telescope tells us what to order and why.
The artistry of great trading is found in what we are doing when we're not staring at screens and firing away. Like the sniper, we succeed because of our focus during the 99% of the time that we're not firing. Creative vision is what makes a work of art. It is also what makes for artful trading. Skilled traders have studied and experienced so many markets that they can recognize when a meaningful pattern is playing out. What if we only traded when that creative insight came to us, when we saw--truly saw--how things were playing out? The cost of overtrading lies not just in the P/L lost, but in the damage we inflict upon our capacity for creative insight. Our job is not to make great trades; it's to have the wisdom and restraint to allow great trades to come to us.
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