When you stop treating trading like an activity to amuse you and start thinking about it like a business it forces you to assess your two most important assets—time and money.
Picking stocks and swinging them takes time. If you’re managing risk properly then you are probably here all session, babysitting a bunch of degenerate misfits ready to send the misfits back to timeout with the other 2000+ misbehaving punks.
You nourish and encourage the productive ones expending precious resources to ensure their success. But what if you could just have one or two?
This is just an open ended question headed into the weekend. Something to let effervesce until we meet again on the other side of a much needed break.
Feel free to drop me any question you might have about this sort of approach. Otherwise I look forward to producing another Weekly Strategy Session to prepare us to bank some wins next week.
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“effervesce ”
dem big words
yes
I trade options in much larger sizes than OA would advise as a % of my account. As a trader I have less inclination towards diversifying and fewer positions are easier to manage, as you suggest. However, such concentration makes honoring stops and general risk management even more critical – which you’ve been writing about recently. The idea is great, I think its very dangerous for the ill-disciplined (i.e. 95% of traders).
this is a more hands-on approach, my bone with options is how the short-dated ones burn up during sideways action while offering on-par or less leverage than futures
Great Expectations Raul. There is no “one size fits all” to this. First one needs to be capitalized. Second ascertain their risk temperment. Third apply a proper strategy for risk/reward
ratio given one’s personal time horizon. I believe the time-money comes from everything taken as a whole. One needs to have short-term allocations as well as long-term. That’s the great thing about option pricing it’s risk/reward/time all wrapped up in a bid ask price(money). It’s awesome when you get a weekly YOLO for 800%, weekly’s are best case scenario for time-money, but you don’t bet the farm. Trying to find mispriced value or risk is why we do this, and it’s difficult with dynamic events coupled with analysts expectations.
well said, I would add thick skin. we are human, there will be errors, and you need to either step back if they become a distraction or brush them off and stay in the zone
I believe there are only two ways to operate in a market.
1. You pick one instrument, something very liquid, active and manageable, like Euro or (your pet) NQ. Trade it 24/7 for 50 pips a day, long and short. Forget about everything else, become a master of one market. Obviously, the problem of this approach is that sometimes your market goes all fucked-up and weird, and you have to stay out for a while.
2. Diversify across not only different stocks, not just various asset classes, but by using different strategies and time-frames. This will take some training and a different mindset, but after a while you learn to look only at weekly chart of XLU (disregarding hourly completely), and equally only at 30-minute periods on corn (forgetting about useless weekly chart). Easier said then done, plus % of account allocation will make all the difference in the world. Results of his type of diversified portfolio strategy is impossible to predict using historical data, just like you can not backtest fishing. I believe that while this is incredibly time consuming method, it provides ultimate freedom, safety and longevity for a market practitioner.
JMHO
i Bergamot, you pretty much just wrote out my current strategy.
An appealing part of trading to me, there are plenty of basics, fundamentals to build on, and lots of room for self-directed tactic and strategy.
With great freedom comes great responsibility. Speculation has the allure of independence and tends to draw in an interesting lot of people.
But in my short experience a rule-based approach based on internal market probabilities and past performance statistics is the way to go.
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