Friday, August 07, 2009

Thoughts on Discovering Our Best Trading

Here's a little thought experiment for active traders.

Suppose you could only make two trades per day and you could only trade at a maximum of 2x leverage.

Once you made your two trades, you were done for the day.

What would happen?

You would have to be very selective in your choice of trades. That means you would have to be extremely patient and disciplined.

You would have to concentrate on identifying the largest moves in a day. That means that you would have to be very market focused, emphasizing only the best and most relevant market data.

You would have to ride your winners and frame each trade with very good risk/reward, because you wouldn't have further opportunities to trade during the day.

You would have to trade only when patterns in the market hit you between the eyes, giving you the greatest possible confidence.

It's all supply and demand. If the supply of possible trades is reduced, each trade becomes more valuable to the trader.

Might many of us discover who we are as traders--what we do best--if we strictly limited the number of trades we placed? At that point, we'd have to be the best we could be, because we wouldn't get another shot at markets.

Perhaps it's true of life itself: awareness of our limited time on earth makes us value each day more, prodding us to live it to its fullest.

Without perceived scarcity, any commodity loses value.