By Hedge Ly
The past week or so i have been working to change my trading system to more accurately & efficiently capture profits in the current market environment. Why the change you may ask? Simply, I'm sick watching huge trades materialize without my participation. How is that possible you may ask? "You killing it over there!" why change? The real answer... volatility is not what it used to be directly translating: stocks are simply not moving they way they have the past 9 months (up down up down) not (up sideways, down sideways) like present.
I was a scalper, market cutter or flipper as we are called. I used leverage to capture small gains in the market, but this style is highly risk averse. After each scalp i removed risk from the market by entering and exiting trades in seconds and sometimes minutes(god forbid). My prior teachers hammered,"DO NOT LOSE, FINISH GREEN". The ridiculous stress this style brought on at times was almost unbearable(cursing, yelling, breaking keyboards, fist pounding) though extremely lucrative when executed in a HIGHLY LIQUID market. Key words "highly liquid", we do not have a highly liquid market anymore, especially in options markets, thus cutting the spread, taking/lifting offers is not "edge". Why? Because there are simply less market participants to take the other side of the zero sum game, ie your stuck. (spreads are W I D E) You can barely enter a trade now days with "edge" let alone exit with "edge" with the scalping style. Yeah you can make a living, but your not going to ever see the fruits of your labor. On a personal note, i think i am losing hair because of the insane stress of trade 200+ times a day. Perhaps this style will allow me to be more specific on twitter with my individual trades, as posting hundres of trades a day can be an overburdon.
My "new" style/strategy
Though my new strategy is really not new at all, it is to my strategy. The strategy involves trading with a set entry and exit point for each trade in % of gain and loss, not just jumping in when when i see inefficiency. I will simply cut losers at a X% and take winners off at X% no deviation. Only deviation is letting winners run past my set target gain, computers cant do this(edge). I cant let you know my %, i will be giving up edge right!! The reason i have began adopting and implementing this strategy is the markets are simply moving slower but some stocks WAY outperform themselves INTRA day on the upside, and even downside. IN the past stocks moved violently up and down creating opportunities to pick off bid & offers locking in .05 .10 and .20 gains(with size) because of pricing inefficienties, in seconds. This was my trade, over and over again, but now i am realizing my profit and loss is becoming nearly inverted, not because of my ability but because the market is not dealing the same cards. Any successful trader can adapt to any trading environment, a poor trader refuses to accept his system is no longer profitable.
IN a shout out to my Mentors @TradingRM, i would like to thank you for helping open my eyes, revealing greener pastures on the other side of the proverbial "game". This afternoon Larry Fisher said to this effect, "It's your choice, are you a scalper or do you embrace risk?". He goes on to say, "Traders who embrace risk are those who make an out sized living.". As i sat in his office i thought about his statements...debating in my head.. "I thought i was a scalper? Who do i want to be?" i concluded...."NO im not a scalper.. I'm a fucking trader, i play the cards dealt" So thank you Larry for helping shape my ever evolving trader DNA. *Every trader derives his/her "signal" to (enter/exit) a trade in very different ways, superiors supportive of traders seeking to define their trader DNA's "signal" is critical for success over the long term.
I will trade this strategy till it fails to perform,
IF you take anything away from this blurb take this... your average daily gain must be greater than your average loss, the rules are as simple as that. Being an intra day trader who remains flat at the end of the day is the new game, the markets increasing efficiency through tighter spreads and correlated markets almost eliminates the opportunity to exploit market spreads. You gotta pay up to play the game, nothing is free.
