How to get out of a trading slump?

From time to time, it will feel like nothing is working.

How to get out of the trading slump?

To be written...

Play good defense or good offense?

In trading, just like sports, one question keep coming to us is, shall we play good defense or good offense?

No easy answer.  To be written....

How to stay flexible and unbiased?

I have been always facing the challenge to deal with bias due to existing positions or previous trades.

Recently I had homerun on short swing, so in recent week I tend to hold short longer, turning profit into loss because I was right on 5min timeframe but wrong on 30min timeframe.

Bias due to recent trades or existing positions are very common, at least to me. The moment I become all cash, my mind immediately turn to much sharper mode and can read the market flow much more clear. And I can start to hit orders with better execution.

A lot to learn as always...

Risk tied to individual stocks

UA had a takeover rumor by Nike, which is denied this morning. But looking back, this is substantial risk to hold individual shorts (or longs) overnight.

Market in massive range mode for DT

By looking at the market and reactions in all sectors, market is in massive range mode.
DT and short term trading are best approach at this point.

It is hard to believe retailer stocks such as FOSL UA would come back to range top.  short ruthlessly again...

 (update after market close: today totally wrong about the market direction. covered with loss in the middle of day)

Shall we feel safe?

Merkel bids to quash Greece default talk is today's headline.

But is it trustworthy?  EUR AUD GBP are in break down mode again realtime.

Looking at the whole landscape of market, a lot of momentum stocks and leading stocks are not showing much fear AT ALL.

Either this is still a good bull market... Or, it is much worse, the market has NOT materialize the fear yet.

My experience tells me, even in bear market, LONG stocks can still be very profitable, but you have to watch out for sudden and fierce downtrend. Usually those are:


1. Gap down caused by EUROPE
2. Open Hour Drive Down
3. Afternoon Drive Down


It is easy to understand. They are gap and two volatile intraday sessions. Learning to escape from sudden bearish moves, then 80% of time you are safe.

Keep it Simple ?

My friends all know I am very verbose. :). It does not necessarily mean I am confused though.
I name everything with a nickname. For every thought we encounter in trading, I try to find similar example in real life.

For all these I do, I seek simplicity.

All my setup sums into follow categories:

1.  Trend Following
2.  Range Fade
3.  Range Break (start of a trend)
4.  Market delay  (I've talked in previous blogs)

Sounds easy, isn't it? 

Reality sucks.  The most difficult thing is how to distinguish between trend and range , and detect the potential transition between them.  Pretty much all my trading techniques are around this central topic.

In range market, you deploy totally different mechanism that you will be using in trending market.

The only way you can keep things simple is to dig out all the complexities first, in my humble opinion.

What you do after a series of good strikes?

Usually what we suggest is, after a few nice run, stop and rest. However, my experience is that it is usually better to reduce size while staying in the market if condition permits. To be written...

Power of multiple strikes

The goal of trading is to consistently win with the right risk exposure. A specific skill that many of us use is to trade multiple times on the right side of trend. I call that multiple strikes. I like to give everything I use with a nickname. It helps me to dramatically improve the results. But it is much harder than it seems to be. More to be written when I am free :)

Monday Morning Quarterback and 马后炮

In trading communities, we use a negative word toward someone who gives advice in hindsight. Another phrase is "Monday morning quarterback", which is not exactly the same meaning, but whatever.

In Chinese, it is called "马后炮".

There are usually a variation of meanings.
I am going to use "I" below so my friends don't misunderstand me and think I am mocking at any of them.  By all means, we are more of less like what I am describing below...


1. I announce I have such and such positions. Then after market condition turns against me, I will claim I did certain things and safely took advantage of market and won, regardless of what the initial plan is.

2. I will often show off what I did in the past. But amazingly, when I start to publicly announce something, 80 percent of them if not all does NOT work. Believe me, that happens, at least to me. Maybe it is only 50 percent of time, but heck it feels like 100 percent.

3. I will give advice in hindsight. I talk about what I should and would have done in the past. Market is full of uncertainty. As Mark Twain said, history never simply repeat, they just rhyme.  Hindsight bias is the inclination to see events that occurred in the past as being more predictable than they were before they took place.

There are more variations. But let us look deeper behind all these for now. I am providing objective analysis to this, by the way. Each scenario has the virtue and the evil.


Scenario 1 above, what happens behind scene? What happens to me is, I am drawn to public attentions. Maybe I am good at trading and I need appreciation; Maybe I want emotional support in the lonely trading world; Maybe I just want success. Maybe I did not announce the full plan. Maybe market is too fast and I can not tell others in time.  Nothing much wrong with that... However, ego comes in and makes me more concerned about the result. I become less flexible.  That leads to performance anxiety, the same type of feeling like going for a speech in the 50k people stadium...  The worst that can happen is that we start going down to the path of "false pride and search for glory", the topic which I discussed in previous blog.

What happens to the audience is important to discuss too.

We watch good traders and we start to follow them in hope of making money at least, if not a fortune. Crap, they start to fumble? Even worse? They start to talk about their contingency plan? They start to tell contradictive things? They start to lie? Then the online trading communities become a stage for entertainment and discovery of all aspects of our weakness.

First thing to point out is, we might wrong ourselves in the first place. We should always be independent thinkers and be responsible for ourselves. The tendency to follow others and blame others are the worst habits for traders. Period.

Second thing is, if we just hate "Monday morning quarterback", we might be walking on the wrong path.  We all love someone calling sth right for us and helping us to make money. Yes. Make money! Now! We don't want to know how to fish... just freaking tell me where the fish is, and better catch it for me now.


I realized I have covered scenario 2 already, :) so I am jumping to scenario 3.  I give hindsight. I love to analyze market after hours, search for perfect plays, and learn how others made home runs.
Over the years it helped me to speed up the learning. I think that is the key to success.

So, I do like Monday morning quarterback. In the meantime, we have to be very careful not to overemphasize the things we learned. Market changes all the time and we have to evolve too. So a good Monday morning quarterback should do a good job.

L Analysis should include:

When:  what time and what context

What:  which instruments and sectors, what happened, what did I do and did not

How:   how it happen? How I managed? How I executed ...

Why: what is the hint and lesson out of this...

The list goes on.

I spend time to review major scenarios every day when I can. It is not an easy task. As far as prediction, I prefer the idea of what I call scenariao- based planning. This is widely used in all fields.
Every once a while, my friends will ask me what do I think about next day's market.
I will simply always say I DO NOT KNOW. What I really mean is, I think I know, I planned for  each possible major themes as I can, but I really have no idea.

I predict all the time, but with probability attached. And I especially work hard on the most unlikely scenario that might hurt me the most. Because I know, if I don't get proactive now, sooner or later, I will run into risk of ruin.

Deep inside, we all want an idol to depend on in the volatile market. It reduces our fear and responsibility.   We all want to become idol of others too. Man, it feels good to be idolized.  

The motives can help us to grow, if we channel our motives and turn them into the true inner strength, instead of false pride. 

Again, I disjointly went too far in this blog article. :)  But I meant well, my friends.

Power of Delay

One crucial advantage for speculators is to react faster to the big market movement.

Market is not efficient. There are always chain reactions. One wave leads to another. One tier leads to another.
It takes different players different amount of time to react to market.

A good example that I traded this morning is UA and FOSL.

There are a lot of context in play:

*Weak indexes
*Friday before 9/11 plus the warning of attacks
*Weak commodities

*LULU earning and gap down 5% at open
*UA and FOSL small gap down in the morning

I have UA and FOSL short from overnight.  I covered a portion at open.
After FOSL fill the gap, I faded with all my strength.

This is the power of market delay.  It takes time for the different tiers to move, even for the same sectors.
The delay can be one minute or five minutes or 30 minutes, depending on your strategy and time-frame.

The bottom-line is that we need to have a grasp of correlation between the instruments you trade.

This also comes back to the "power of speed and effort" topic I discussed yesterday.

We make effort, and we gain speed, then we can take advantage of the market delay.

This is probably why a good trader on www.trader1688.com named himself "慢两步“ (2 steps slower).
We think ahead of market, plan ahead of market, but we don't rush into the forest when it is dark.
We act one or two steps late, but not too many steps later either.

Power of Speed and Focus

I value the speed of thinking a lot. It is extremely important to short term traders. In the meantime, it can also substantially improve efficiency of swing traders.

Market is not a place for fun. If you are looking for excitement, go to Las Vegas.
At least you get free drinks there. Market is a place full of wolfs and alligators, as an excellent trader said in the Chinese trading forum www.trader1688.com.

Over the years, I accumulated experience on short term trading, especially intraday, through a lot of trial and error. I learned to appreciate how speed can affect trading performance.

I will just talk about speed of monitoring market and absorbing market information. Thanks to the modern technologies, now we have too much access to too much data, news, charts. I am not talking about over- analyzing market and get buries in excessive flow of information. Market sometime is simple, but it is never easy. The moment you step into market, you are competing against market makers, institutions with superior info access and exchange access, and those evil trading robots. So don't pretend you are the smartest ass out there in the universe. Market is a good place to find out all your weakness.

Ok, where am I? Right...  Speed of monitoring market.  How good are you on analyzing the main themes of market?

At any given moment, time yourself as if you are the reporter of cnbc. How many minutes you need to find out what is going on in the market, forex, bond, commodities, indexes, major sectors. Which groups are leading, which groups are lagging, sentiment, market breadth, technical indicators and support resistance levels, volume,  what news are happening ... Try to cut that time down in any way you can. Use your workflow to simply it. Learn to filter out noise. Write tools to do it. I designed my own tools to monitor the market and target to see major moves within 60 seconds.  And try to make decisions within 5 minutes if not shorter. Don't get me wrong. I am not talking about overtrading here.  If you speed up the ability to analyzing information, it frees up your mind and reduce stress. Clock runs slower.

Today's market is a good example. When ES was making new high at 1203 and NQ was outperforming, between 11.10am and 11.20am i think, some subtle signal was detected. I was basically reading through market sectors every 60 seconds, 10 times nonstop.  I was looking at the sentiment, volume, leaders, laggards, non-stop. Could it be noise? Yes. 80% of time. But it was alarming.  I slowly added my shorts on index future and stocks. Fading at top and monitoring closely... I was not sure. I set up more limit orders (which was never really filled later).

I know there will be speculators challenging my way. But to me, market is a place of unlimited risk if you don't manage well.  Only by speeding up your brain, you can free yourself to execute better.

How we can get there?

First, I hold the belief that talent is 20% born, and 80% trained. More than three decades of academic research showed that a focus on effort, not on intelligence or ability, is key to raising successful kids. After all, raising successful kids are as hard as raising good traders. There are two types of learners, fixed mindset type versus mastery-oriented mindset. The mastery-oriented people think intelligence is malleable and can be developed through education and hard work.

Second, we need a systematic way of training. An easy method my son's piano teacher taught him is to break down the learning into small pieces.  Play two measures and repeat many times. Master it before you move on.  Professional sports players all do this. The best tennis school in Russia, which produced Safin brother&sister and other outstanding players, don't take kids to competition until years of training. All they do is precise and deep training on basics. You get my point...

Third, grade performance based on the right criteria. Not just money, but on how well you stick to your training plan. I had written "we all need a glorious day" to talk about this. It is about hard work and well-planned practice.

I have always admired great sports players like Federer, Jordan, and Beckenham, ... The list goes on. Federer plays with so much speed, force, and precision. And this Beckenham, man, almost every single time, when needed, he could send the soccer ball into the corner and then gave false hope to England fans. ( I admit that I have some resentment toward him, mainly because my wife still thinks he is cuter than me.)

The superior performance did not come from nowhere. They spent a decade in the training for those moments.

The title of this blog is power of speed. But I am talking about power of focus and effort now. So, enough is enough.  Hope you get what I mean. And I meant well, my friends.

False Pride and Search For Glory

I read the book of "Trader Vic-Methods of a Wall Street Master" many years ago.
There was one chapter that stroke me most. It talks about the "False Pride".
The ideas/words here are referred and digested from chapter 16 of the book.

False Pride is an illusion that hinders many traders regularly, myself included. And this is why I write this post. So I can look into the mirror and make sure I don't walk down to that path.

False Pride System, wrote in another academic book, consists of "idealized self-image", "the search for glory",
and "neurotic pride".


Idealized Self-Image


Through the use of imagination, we build a fortress against perception of a hostile reality. We create an idealized image of ourselves. In this process we endow us with unlimited power and become a hero, a genius, a saint, a god.


Search for Glory


Self-idealization inevitably grows into a more comprehensive drive called the search for glory. 
The need for perfection, neurotic ambition, and the need for a vindictive triumph.


We starts out on the chase for the phantom of glory, but the inner distress is still as great as ever.
The worst element of the search for glory, in terms of the damage and human suffering it causes, is the need for vindictive triumph. 
This need for vindictive triumph is inherently destructive, both the the individual with the need and to the people he deals with.


In the search for glory, we are also compelled to act compulsively, with disregard for our best interests, in order to keep intact our idealized self-image. 



Neurotic Pride


Driven by the search of pride, we must evade reality on a grand scale. We appear to thrive on admiration,
respect, and blind obedience. We may be generous and charming, especially to newcomers in their lives who offer us further sources of admiration. We may pride ourselves on sexual conquests, on our circle of influential friends, on our unique material acquisitions, and so forth.


We don't accept our mistakes. when a trade goes against us, we blame it on the "stupidity" of everyone else in the market. We claim that we are just one step ahead of everyone else. We are stubborn not only about trading, but also about politics, economics, the nature of relationships, or whatever.


We all have goals in our lives and want to excel. But there is a distinction between true humility and false pride. As a trader, I write this post (in reference to the book) to warn and remind myself to work hard on the path of searching for genuine values and achievements, rather than false pride.