Surfing The Markets, or Quit Trying So Hard To Be Right

This is another chapter in the continuing saga of my recent ponderings of how to understand and approach the markets. Again, more of a journal of thoughts and ideas than any kind of hard statistics or methodology. However, it does constitute part of the foundation on which I am building those things for myself.

•Being Right vs. Trading Right

My past trading lives have been fraught with various psychological maladies. One is a need for each trade to be a winner. I blame the SEC and the pattern daytrader rule. When you only have three round-trip daytrades in a week, they HAVE to count. When I would choose one trade to take, I was already biased into making sure this one worked out. The result? I stayed in poor trades for the full 1R loss, even if the trade immediately went against me, hoping that the market would reverse and bail me out. I would also take profits (when I got them) far too early out of fear of “wasting” a daytrade and not having a winner. Of course, a need to always be right and overanalysis have also plagued me.

The Phantom of the Pits has a rule that he calls “Rule #1”. It says to get out of a trade if it is not proven correct. To me, this means that if the trade doesn’t work according to the thesis that your setup is based on, you cut it fast. PotP says “Don’t wait for the market to tell you that you are wrong. You decide if you are wrong!”

•Swimming vs. Surfing

This need to be right and trying to force a particular idea onto the market is like a person swimming through a rough sea among large rocks and strong currents. You will get battered as you try to plow your way to the other side, or wherever it is that you want to go to. A lot of traders make the analogy that good trading is like surfing, and I am beginning to agree. While I am no surfing expert (any surfing readers feel free to chime in), I can understand the idea: ride the wave. You go with it. You don’t try so hard to force a particular course or outcome, you just go where it takes you. No two waves are the same, just as no two market moves are the same, but you don’t need to understand or predict the wave to ride it. You just need to time your entry to the wave pattern, and go with it as long as the wave stays intact. It’s a really simple idea, which is one reason why I think it can work. This means that your job as a trader is to watch the wave and flow with it, period. Your job is not to create the wave, to understand the wave, to predict the full extent that it will last, or to enter the wave out at sea at the exact beginning. You see it, you time it, and you just go while it lasts. You ride a portion of the wave. And sometimes you will get in right at the end and get wiped out. Sometimes you will try to get in before it really moves and get stopped out (go nowhere). It’s okay; it’s all part of the surfing experience. This generality and $3.50 will buy you a grande latte, though. The hard part is making a defined framework to recognize the always changing wave pattern.

•Knowing When to Trade and When NOT to Trade is Half the Battle

Knowing when to avoid trading is probably more important than your actual trading setups. Expecting trends at the open of normal days, expecting chop on low volume days and over lunch time–these are the kinds of things to know before looking for a trading theme or strategy during those times. Einstein tried to come up with a grand unified theory of mechanics, but he never found it. It could be that there isn’t one. There is also no grand unified market setup! Different trades for different times. Don’t buy strength during choppy markets. Don’t fade moves in strong ones.

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One Response to “Surfing The Markets, or Quit Trying So Hard To Be Right”

  1. tapesense Says:

    I spent plenty of time as a kid on a boogie board. Used to have dreams of peacefully being in thousand foot surf, enormous swells carrying me up and dropping down. Safety is to dive deep, below any crashing waves. Riding one, well, right place and time and one kick and you’re in the green room, and it’s either dive deep and get out or run it to daylight. I guess the buoyant vehicle would be understanding price action. The bar by bar advantaging/disadvantaging for buyers & sellers, plays of trends with MA, fibs, levels, testing, retesting and other compulsions, along with the dollars entering eyes blind. And, breadth. A tick pulse is a kicking fin on an ad line board, and these two together ride an average of their efforts. If there’s a splash, the fin is kicking. Good for a little swing, tiny style as per finra’s rule for a two-class society, lol 🙂

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