Monday, November 09, 2009

When Is There No Opportunity for Your Trading?

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.