Trading Strategy Themes

I’m documenting here some of my recent thoughts about themes I want to capture in my trading strategy. This is more of a scratchpad of ideas than a complete article, a window into my twisted mind, as it were.

•Fear and Greed are like fire and water. Both can help you, both can kill you. Use them, don’t be used by them. Fear to break your own rules. Fear to lose your discipline. Fear to lose more than you planned to before the trade was opened. Be greedy and hold out if the trade is acting well. Greedily press your winners. Sell on strength, taking advantage of the greed of others. Buy on weakness, using the fear of others to your advantage.

•You make money by taking it from a loser (especially in futures). Your best chance of success is to take a loser’s position off of his hands at a favorable price to you. We’ve all been on the other side of that trade, but that’s where the market profits come from. Price moves because it has to, not because it wants to; or rather most traders make trade executions because they have to, not because they are taking advantage of an edge. The losing trader is your edge. Fade the losers.

•Define your market environment. I want to trade the market open. The market moves at the open. Volume is high, trader interest is high, momentum is high. I want to be early to position for the rest of the day, and if the trade works out, waiting for a move of several points. Conversely, the lunch hour(s), pre-news (Fed minutes, important economic numbers), summer doldrums months like August, pre-holiday sessions are all poor times to trade for trends or momentum. Volume is low, traders are on vacation or waiting. Trade is choppy and random, dominated by noise. Knowing and defining the current market environment and only employing strategies that work within it is crucial.

•Trading the markets is a battle against yourself more than a battle against other traders. I know these things about myself:
-I am loss-averse. Losses weigh on me more than wins lift me up
-I hate being in an underwater trade; no staying power or strength to fade price like some others have
-I would rather win 1 point 9 times out of 10 than win 10 points 1 time out of 9. Play for singles, not home runs
-I can manage exits well. I need systemmatic discipline for my entries
-I like to be in a trade for as short as possible, then do it again and again. I don’t want to wait at the plate all day for “my one perfect pitch” to swing at
-I need to be available to take every trade indicated by my system. If I pick and choose, based on my PnL or my daily schedule, I will doubt myself and end up skipping the trades that would work out, while forcing subpar trades to make it back

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