Mar

4

 What does a good trade look like?

Continuing in my vein of only speaking about areas in which I possess a modicum of understanding of and experience in, I shall stick with the shorter term end of the holding period spectrum, say minutes to 36 hours.

There isn't anything necessarily predictive about any of the following, but it certainly opens areas of research. After an enumeration of a large sample of recent transactions I think the 'feel' and visual manifestation of a 'good trade' includes the following:

1. Imagine a car hitting a very thick wall. The energy of the car flows into the wall and is 'reflected' back into the car which then jumps back away from the wall. Rather like hitting a ball on the half-volley. Buying into mini Armageddons and selling into mini Elysiums can have this 'feel'.

2. There is almost no 'shown' liquidity (Ha!) on the depth screens of the DMA access point.

3. As one is not a silicone based life-form (Yet! Just waiting for the compulsory cybernetic transformation over coming decades in the name of 'security') an analysis of ones thoughts as a dealing level approaches is interesting. Although the effect in me personally is much less than two decades ago, I still note my thoughts and I find the following:

- If the decline or rally leading to my execution level is caused by news or the ramblings of a politician, then one tends to magnify its importance.

- If there is a round near then that may also increase anxiety.

- I bet Kovner and Druckenmiller are the other way around… All three mental phenomenon are nonsensical, distracting and negatively correlated to trade success.

Another related matter is the battle between trying for perfect execution of strategies or just getting them on. On balance, and in the context of high numbers of transactions, I think it pays to go for something very close to perfection (self/ strategy defined) Even though this sometimes leads to periods of noticeable inactivity as I personally experienced last summer.


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