Morning Market Thoughts

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Good morning. The S&P futures are up 8 points, while the Dow is up around 85 points. The week of Thanksgiving is always accompanied by lower trading volume as many traders start pushing away from their desks a bit earlier. The moves tend to be sluggish and slow…but the direction tends to be higher,with the average weekly gain of the S&P about 1%.

I don’t see much happening this week, so I’m not doing much. Are you? Decide on your timeframe. How long do you tend to hold positions. Some tend to be very fast traders, holding positions for very short periods of time and selling when a stock shows the first signs of resting. Others tend to hold positions for longer periods of time — several weeks or months. Knowing your holding period is critical–CRITICAL–to having success in your trading. If you don’t know your tendencies, then you are going to be sucked into whatever is happening on any given day. You’ll sell a very profitable stock that is working quite well and showing no signs of weakness because the market is down and you see negative stories in the news. You’ll buy a stock that you would NEVER ordinarily consider buying because you saw a comment on it that pushes you into action.

I recently responded to a tweet by Stephen Burns (@SJosephBurns) about trading success. His suggestion — take one simple strategy and record every trade. My response: “Being a jack of all trades is great for home repair; but it’s not so good for trading. Curly (City Slickers) said it best: ‘One thing.'”

I really believe that. As a part of my development as a trader over the past twenty years, I’ve tried many styles of trading. For a short time, I even warmed a chair in a day trading shop up in Seattle, showing up about 30 minutes before the open, and sitting in my chair banging stocks as a SOES bandit. It was a great feeling to walk away at the end of the day without any open positions to worry about.

But it wasn’t so great when I walked away at the end of the day with nothing to show for my efforts. After spending a day filled with stress and a hyperactive mouse, I would think about all of the things that I could have done rather than working for free (or worse, paying money via losses for the privilege of drinking too much coffee and draining a bottle of Visine into tired eyes).

Over time, I’ve figured out what works for me. I try to learn from the best by reading as much as I can about trading tactics and methodology, theory of markets, psychology, and just about anything else I can get my hands on. Frankly, most of it isn’t particularly useful, but I always find value in everything I read. In the mid-1980’s, I was a physical therapist and sports medicine specialist in San Diego, working with both world class athletes and sedentary housewives with bad knees. I remember one time when I went into the office of my supervisor, Byron Wildermuth. I expressed frustration about having tried many different approaches to helping one of my patients with severe back pain from a disk injury. I said, “…and the most frustrating part is that I haven’t learned anything!” Byron said to me, “Dan, that’s wrong. You’ve learned all of the things that don’t. Now, forget about those and try something different. And keep trying different things until you get him some relief.”

That resonated with me. So I kept trying different approaches, failed a few more times, and he finally walked out of the clinic with a straight spine rather than the S-curve that he came in with.

You should do the same thing with your trading. Take stock of the things that you are doing. Do they work for YOU? They may work for other traders…but do they work for you?

Find what works for you, and then get better at it. When you follow Curly’s approach to trading, that “one thing” will give you success beyond your most optimistic dreams as long as you stay true to that one thing, and put in the effort to become the best.

–Dan

Note: By the way, here’s how I finally “fixed” my patient with the crooked, excruciatingly painful back. Having tried everything from traction, stretching, manipulation, ice, heat, craniosacral manipulation, massage, electrotherapy, and all of the other accepted methods of therapy, I finally went outside the box and tried something that made sense to me. I made the guy stand up as straight as possible. I went to his side, bent down, and put my shoulder into his rib cage. I put my hands around his waist and grabbed his hips while saying, “Trust me, ok?” I then shoved my shoulder forward at the same time that I pulled his hips toward me. Boom! The guy who had been coming to therapy for a month finally stood up straight after I applied my novel technique of brute force to the problem. Instant relief! (Those who know me well will not be0 surprised at my approach When a hammer doesn’t solve a problem, I just look for a bigger hammer).

Keep trying to find your way in this amazing profession of trading. Be self-aware. Keep track of each and every trade. You’ll want to ignore the irrational ones that are a bit embarrassing. But frankly, those are the most important because they hold the answer to why your account isn’t growing despite all the great trades you have made.

Ultimately, you’ll find that one thing that you’re good at. After you find your one thing, just do that — again and again.

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