Trust

Yesterday I was writing about how I'd like to pay more attention to my intuition to achieve a better psychological balance with the idea that this would translate into a more fluid (and profitable) trading style. I think that this is a valuable insight but in a sense, I'm putting the cart before the horse because overriding this – and wrapped up with it - is trust. 

In order to trade well, I have to believe that my method works whether it's purely technical or a mix of technical and gut feel. I realise that I regularly second guess myself or bail out of winning positions for no good reason and I'm sure that it's a life issue that affects my trading and all the trading based analysis work in the world is not going to get to the root of things.

This is something I have been aware of for a long time but I've been skirting the issue somewhat.

My daughter is just about to travel overseas and while my wife and I are fretting about all the little things she needs to do, our daughter is fairly unconcerned. She's going to deal with things as they arise. I was far less organised, or worried, when I travelled as a young bloke and it reminds me that I've lost some of that sense of trust that things will work out. I assume it happens to everyone with age and it's probably why it's good to get out of your comfort zone sometimes.

I don't mean to downgrade what experience has taught me but I do want to let go of the desire to control my environment that has grown with age. I'm learning to meditate and my struggle with that has made me aware of how much my conscious mind wants to run the show.

This morning, I felt slightly different when I came in to work. First of all, I ran through my charts and didn't try to make a silk purse out of a sow's ear. I could see possibilities but I didn't try to see them as probabilities so that I could leap into a trade. This was good, it meant I was willing to let the market tell me what it was doing rather than me trying to make it do what I thought it should. Secondly, I was happy with the positions I put on yesterday. I wasn't jumping at shadows.

When the market actually opened, I felt more able to watch the early action than immediately participate but in the end, this relaxed but alert state lasted for 18 minutes. That was when I felt compelled to do a trade! It was a reasonable trade too, but I knew that there was no rush and I've ended up paying a couple of cents more for some puts than I could have. The puts are BHP July 4300s at 31. The stock has been grinding up with the market with slowing momentum and has broken through yesterday's low. It looks like the start of a 4th wave retracement and the options are fairly liquid so I'm hoping to sell them tomorrow or Monday. Anyway, it's a reasonably good trade but I definitely could have waited for, say, the jobs data and the Chinese market open which came in at around 11.30. Here's the daily.

PDN has also broken yesterday's low and is down 5 at 264. This is looking ok now and it might have been better to wait until today to put on this trade. However, there was a similar signal a couple of days back so it's not straightforward.

IPL is the trickiest position. It traded at 393 on good volume to confirm a new high but it hasn't been able to hold those levels. I've been concerned because it could reverse if there are too many short term longs like me in the stock. For now, I'm trying to let both possibilities exist in my mind and just watch the action.

3.30 It has been a really challenging day because apart from the early BHP trade, I haven't done anything. The market has rallied from some early weakness but not got very far and I've simple watched my positions wobble around. Normally I might look for a couple of day trading opportunities to keep myself busy but I just don't want to do that today....too many unresolved ideas about how I want to trade.

There was an interesting and perceptive comment about the nature of "normal" work versus trading and one element that I find really hard to deal with is not being busy. In most jobs there is a straightforward link between effort and satisfaction/reward etc., but it's not the case with this work. You really have to relinquish control and let events unfold and usually, the less you do the better. It also feels curiously amoral when you've grown up in a culture defined by productive work.

Most traders fill that void with admin, working on systems, watching every tick, writing blogs(!) and intraday trading but I'm pretty sure that apart from a few basics of running your business, the rest is displacement activity. I know that I can work really hard on intraday trading but I normally do less well than simply taking overnight positions and when I try to do both, it's the more profitable position taking that suffers.

4.12 Appropriately enough for an inactive day, the index finished almost unchanged. IPL slipped a cent and PDN three cents while BHP was bid up on the close.