2014 Breath Holding Contest

Fight, flight, and freeze.  These are the three primal responses which can be triggered when you feel threatened.  They are formulated by the limbic system of our brain.  It is much more powerful that your logical mind and is the force that can drive an otherwise normal person to smash a villain’s skull into pieces if they were to perhaps threaten your child or favorite territory.  Ordinary people are capable of extraordinary and sometimes disturbing feats when put under threat.

Somehow, the market, a mechanism of pricing commodities and other assets has the profound ability to activate our limbic system.  We are all here to make money.  There is no question about it.  Nobody is managing their accounts for the thrill of it.  If you are, then goodness, may I suggest auto racing or biking?  The problem is, money provides security and other luxuries.  If you take a trade knowing you are right, then when it does not work in your favor it causes a threat to your ego.  This is very much a force in trading.  Now your ego is theatened because you knew you were right and maybe your were even a bit of a brag about it. Perhaps you start having a conversation or two with the voices in your head, your limbic system is engaged and you are in the back seat. Said another way, you are like a small man pulling on the reigns of a giant elephant.  This is how sometimes you can look back on a trade and say, “how did I do that?  Was that even me?”  Trust me, I can recall this feeling very personally, I have lost 10s of thousands of dollars in profits this way.

Here’s what I know—I will always have an emotional response to the outcome of my trade.  I must put risk in place before entering any position and stick to it.  Once the trade is on I know it will take most of my energy to keep myself in check and let the market prove my hypothesis.  You need to work on this more than you need to work on your technical trading skills.  90% of this game is mental.

I set up all of my trades well in advance of this fast market.  I took no action today.  Yesterday’s only action was buying YELP.  Should I have sold YELP today?  Absolutely not, it has done nothing wrong even while the markets take another beating.  AMZN, I am still with it.  It looks fairly close to being wrong, but is it wrong yet bro-sis?  No.

The PPT Breadth, one of my cold, dead data points on the market, had its lowest reading of the year today.  Nasdaq cumulative delta (net of trades executed at offer– trades executed at bid) was red, but it was worse on Monday.  I have little data snippets which suggest we might see some sort of reflexive-type bounce soon.  Therefore, I wait these suckers out, one false breakout after another, waiting for my proper goddamned moment to clean up my book, for fuckedsake.

A good bull market never pulls back to let dippers in or shorts out.  Flip that idea on its head and you have our market since the day Alibaba started trading.  Take out a 30 minute chart of the Nasdaq and compare it to BABA and you will see what is killing this market.  We are being liquidated upon, broad scale, bulls.  This is not the time to be heroic and averaging down down down.  Steady you mind and breath.  If you must capitulate then make the market work to take you out.  Do not simply folly out because of fear.  And don’t be a hero either.  Just let the wave take you and spit you out.  Then start swimming.

Final thought-if you decide to switch your internet service provider midweek, keep your old service running.  If I did not have the mother ship wired up with ATT and Xfinity I would currently be Xfinifucked.