Mid-Week Update

“We had a field day before anyone knew anything about shorting. It was almost a license to steal. Nowadays, it’s a license to get hosed.” – Julian Robertson

No change to the latest video, our outlook remains the same as we wait to get through Quad-Witching on Friday. If you missed it, we would take the time to go through it as we review the major asset classes, recent moves and what to expect this week.
If you have never had the pleasure, we would recommend taking the time to listen to RObert Frey and his talk “180 Years of Market Drawdowns”.
If you are interested in a more structured way of tackling the business of trading, attending a live daily morning call or a more detailed discussion on the charts we post / trade ideas, don’t hesitate to check out our Premium content.
Wishing you a great day ahead.

Waiting Game

“Your mind is like water, when agitated it becomes difficult to see but if allowed to settle, the answer becomes clear.” – Tsem Tulku Rinpoche

No real change to what we have been discussing, so we just have to be patient and let things play out. In the meantime, here is some food for thought from our Trading Reflection post:
– In order to put yourself in a condition to succeed, it’s really important to have realistic expectations.
– Many can talk the talk but few can translate this into a decent track-record… the basics are, pretty basic but practice is more tricky. If this rings true for you, you might want to focus more on understanding bet size and how that effects the translation of your edge. Obsessing about entry and triggers, all things being equal, is probably the least important aspect yet very few ever get this. Remember that if you get your bet size wrong, you could end up with a negative p&l even with a guaranteed mathematical edge.
– In order to really make a step-change in your trading journey you have to make a conscious decision to be honest with your progress and accept full accountability for your actions. You can’t afford to delude yourself and handicap your progress. Always confront your problems, especially those related to your mental game. Don’t find excuses, put yourself in a condition to progress and evolve as a trader.
– Fear, indecision, uncertainty and related emotions all tend to be linked to a lack of understanding of the situation at hand. The more you work on your overall domain knowledge, the less room there is for these emotions to get in the way of you executing the task at hand. Furthermore, working hard to understand ever-changing context quickly translates into a better understanding of how to play whatever hand you get dealt.
– Trading offers you the privilege to be able to create your own positive ecosystem. Don’t ever take that for granted and work hard at blocking out negative influences and putting yourself in the best possible condition to have a chance at succeeding.
– In this game, resilience and self-discipline are far more important than any kind of diploma or certificate. No standardize test or program can really prepare you or serve as a good predictor of how you will fare day in, day out, in a live trading environment.
– In different shapes and forms; ultimately leverage kills. Once you understand and control that, you can get away with a lot and still be around to fight another day. Remember, it’s about consistency and longevity.
– As hard as it may be for most to fully grasp, remember that you don’t know what you don’t know. Keep an open mind and always be ready to question your assumptions. If you keep on thinking the way you have always done, not only will you end up with the same results but you will also waste the opportunity to grow and evolve.
– There is no reason to swing for the fences every day. It’s about showing up, come rain or come shine and playing the best you can with the hand you have been dealt. You don’t need to be perfect and you don’t need to hit 100%. However, what you do need to strive for is to do more of what you do well and less of what you don’t do so well. Slow and steady; keep on moving in the right direction.
– Make sure you understand the basics and then find out what works for you. Don’t be in a hurry, give yourself time to learn and put yourself in a condition to give this a real good shot. If you are wired to trade, this is a great profession. If you are not, then there are a lot of other things to do in life.
– Easier said than done but once you have set yourself up with a realistic road-map; you just have to stick to your rules, plan and set-ups. That’s the hard part. No fancy things, no bells and no whistles; do more of what you do well and less of what you don’t do so well. Never underestimate how hard it is to get used to just showing up day after day and monotonously implementing your strategy.
– Keep in mind that self-sabotage, whether conscious or subconscious, is probably at the center of most issues you will face in your trading journey. Furthermore, the root cause of this self-sabotage is usually linked with a very basic lack of domain knowledge coupled with unrealistic expectations.
– Even if you are a discretionary trader, this does not mean that you can consistently get away without having a systematic approach to the actual execution and management of your trades.
– This is a marathon, not a sprint. The markets aren’t going anywhere; take your time and do things the right way. Taking repeated highly leveraged shots at low liquidity binary events is not going to result in a solid long term track record.
– It may seem counter-intuitive but the truly great achievements come from setting small goals/targets and repeatedly delivering on them not by setting unrealistic goals and exposing yourself to the inevitable failure that will result from consistently playing from a position of weakness.
– The key balancing act is; being a flexible humble student of price action and market psychology whilst being rigid on positive reinforcement and mechanical execution in a live environment.
– There is very little to be gained by actively looking at your p&l. The focus should be on what you are trying to do and not how that translates into your bottom line. If you have done your homework, you already know what the consequences of your actions will be. The vast majority of traders benefit from taking their p&l completely off their screens and not letting it distract from the task at hand.
– It is far easier to have a plan, wait for the conditions you are looking for to line-up and simply execute than to show up and wonder what you should do. In the long run, traders that can take emotions and bias out of the equation and decisively execute, will consistently have better results and less p&l swings.
– No matter how solid you get, inevitably, you are going to be confronted with a lot of adverse and irritating developments over the years. The quicker and better you get at accepting/internalizing them, the faster you are going to continue to grow/evolve both as a person and as a trader.
– Getting emotional usually tends to cloud judgement and accentuate bias. We work very hard on trying to stay as neutral and focused as possible; you need to learn to be detached. Stick to the process and let everything else take care of itself.
– Peace of mind is a crucial piece of the puzzle… don’t be fooled into thinking that it comes naturally. Just like any other part of your game; it’s something you have to work hard on.
– If you decide to go down the demo route, remember that you are pretty much wasting your time unless it is done as a proper dress rehearsal; everything needs to be done as it would LIVE. Failure to grasp the importance of proceeding this way will inevitably result in all kinds of struggles and false expectations.
– Broadly speaking, the intellectual part of the work is done before your actual trading. When you are live and ready to allocate capital, you are strictly in implementation / execution mode.
– Forcing activity rarely translates into a positive and smooth equity curve. Sometimes, there is only so much you can do with the hand you have been dealt. Markets move in cycles and many fail to truly understand how much of a waiting game this can be.
– Fear, greed and getting angry will only distract you. These emotions have a tendency of ‘switching off’ any kind of mechanical / studied approach and triggering rash behavior that only detracts from the proper execution of the task at hand.
– Remember that the real edge is at extremes because that is where asymmetric risk reward comes into play.
– If you are trading scared, you should not be trading at all. Go back to the drawing board, get back to basics. There is no point in making things harder than they should be. You can lie to yourself on the surface but not deep down inside. If you don’t really know what you are doing, you will probably not be feeling comfortable and this should not come as a surprise.
– Goal setting is a lot harder than it may seem. For a lot of people, consciously or not, there is a real struggle between setting goals that are either too easy or completely unrealistic. It’s important to set smaller milestones in the context of a bigger picture/plan.
– You should never be in a position where the outcome of one single trade could change your life; neither for the good, nor for the bad. Once you really internalize this – and it’s a lot harder to do than it may seem – then you are ready to start working on consistency and longevity in a professional manner.
– It would not be natural to not have to deal with all kinds of emotions but it is essential to understand that a low, focused and consistent level of intensity is key. The vast majority of people that become proficient have learned the importance of keeping a level-head and tend to reflect this kind of attitude. The calmer you are, the more focused you can keep yourself and the more effective you are at executing.
– Trading is an extremely hard way to make a living. Don’t let anyone tell you it can’t be done but equally, don’t let anyone give you the false impression that it is easy, that there are shortcuts or magical formulas.
For all of the new followers, don’t hesitate to explore all of the content on the blog. The interviews could be a very interesting place to start to help put the business of trading into context and to give you an idea of what to look for in terms of realistic expectations. There is a lot of free content on the blog for those that are willing to take the time to explore.
Should you be interested in a more in-depth discussion on the topics mentioned in this post and a more structured approach to setting yourself up to have a chance of succeeding, you might want to check out the  Foundational Webinar Series.
As always there is no substitute for real-time/live action; if you are interested in attending a daily morning call into NY with a more detailed live discussion on all the charts and ideas we highlight/review in the outlook video and here on the blog, you should check out our Daily Webinar Group.

Matthew McConaughey Speech

Principles for Success

Food for Thought

“Go placidly amid the noise and the haste, and remember what peace there may be in silence. As far as possible, without surrender, be on good terms with all persons.
Speak your truth quietly and clearly; and listen to others, even to the dull and the ignorant; they too have their story.
Avoid loud and aggressive persons; they are vexatious to the spirit. If you compare yourself with others, you may become vain or bitter, for always there will be greater and lesser persons than yourself.
Enjoy your achievements as well as your plans. Keep interested in your own career, however humble; it is a real possession in the changing fortunes of time.
Exercise caution in your business affairs, for the world is full of trickery. But let this not blind you to what virtue there is; many persons strive for high ideals, and everywhere life is full of heroism.
Be yourself. Especially, do not feign affection. Neither be cynical about love; for in the face of all aridity and disenchantment, it is as perennial as the grass.
Take kindly the counsel of the years, gracefully surrendering the things of youth.
Nurture strength of spirit to shield you in sudden misfortune. But do not distress yourself with dark imaginings. Many fears are born of fatigue and loneliness.
Beyond a wholesome discipline, be gentle with yourself. You are a child of the universe no less than the trees and the stars; you have a right to be here.
And whether or not it is clear to you, no doubt the universe is unfolding as it should. Therefore be at peace with God, whatever you conceive Him to be.
And whatever your labors and aspirations, in the noisy confusion of life, keep peace in your soul. With all its sham, drudgery and broken dreams, it is still a beautiful world. Be cheerful. Strive to be happy.”
– Max Ehrmann, “Desiderata

Safeguarding Your Money

Risk Taking

“In ‘Confessions of a Winning Poker Player’, Jack King said, ‘Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.’ It seems true to me, cause walking in here, I can hardly remember how I built my bankroll, but I can’t stop thinking about the way I lost it.” Mike McDermott (Rounders)
As we head into the end of the week and what we hope will be an interesting trading day, the only questions that really matters is: “Are they going to buy up risk into the weekend?”. We have outlined all the key issues/themes/charts that are in play, so just scroll back on recent posts/charts for an overview.
As we wait to see how NY flows are going to take this, we suggest making some time to listen to what Aaron Brown has to say about risk. As a general rule, we would always make time for Aaron:

150: A lesson in risk taking—with the former risk manager of a $200B fund, Aaron Brown, Pt. 2

As a bonus, here is his MIT lecture on Poker Economics:
Wishing everyone a great weekend. We’ll be back on Sunday with our weekly outlook video.

Volatility Risk

In case you missed it, here is a very interesting sequence from Eric Scott Hunsader on yesterday’s action as it developed:

If you are looking for a great read, we would encourage you to go through the latest research piece from Artemis: Volatility and the Alchemy of Risk.
Wishing everyone a great weekend ahead and don’t forget that there is still plenty of o/n risk as we close up this week.

Thinking, Fast and Slow