DAYTRADING: The Highs and the Woes
I got a call from my shrink, doc Krokinkite. He needed a crisis session. This was unusual; usually I call the doc for a crisis session.
The doc has been good to me over the past decade so I felt compelled to run to his rescue.
He was lying on his leather, lumpy couch, sobbing. I let his tears flow and sat in his comfortable chair behind his desk.
He finally got it somewhat together. "What's the problem doc? How can I help you?"
He sniffled, reminded me about his financial advisor, Mendelbam-the Fund-Manager who put him into stocks at the top of the last bull market and averaged down; all the way down.
"I fired the bum, " he told me.
"I remember doc," I replied.
"My stocks went down seventy, eight, ninety percent. It was awful."
"I remember doc."
"And when the market bottomed did I get a call from than no good Mendlebaum? No, what I got was a lot of margin calls. Mendelbaum put me on margin, said I couldn't lose
"It must have been awful for you," I said
"It was awful. For me. Mendelbaum was raking in commissions, $120 every time I bought. $120 every time I sold. With the commissions he went to the Caribbean with his secretary to ride out the storm."
"How can I help you doc," I asked gently.
"I want to trade the way you do." he said.
"But doc, I trade three futures, nothing more. I'm usually in and out of my trades within forty-five seconds. It's my trading style."
"A trading style you have? What means a trading style," he asked.
I felt empathy for the doc. He was far behind the 8-ball. He was forced to sell his house at Oak Bluffs on Martha's Vineyard to meet his margin calls.
"Every trader has a trading stlyle. Some traders watch the numbers released by the government; quarterly GDP, employment numbers, consumer prices, Federal Reserve interest rates. The list is endless. Some do well, some don't. I suspect that most traders don't realize that they have a trading style."
"So what is it you do? What's your trading style?" he asked.
"I try to keep it pretty simple doc. I've my charts up on one computer, my trading page on the other. When I see a trade I click a button. I either buy or go short."
"But don't you try to determine where the market is going each day?' he asked.
"I have no idea where the market is going. Some traders do, and they do well. I don't. Each day is a new market for me."
"I've never heard of such an approach," he said.
"I do ok doc, it seems to work for me. Mostly I just watch my three charts and wait. When I see something, a trade that looks good, I go for it. Often the trade will go wrong and I'll exit for a loss.
"You said something about charts. They must be complicated."
No doc, they are quite simple. My charts show the price action of the futures and the volume. That's all I need."
"I'm gonna do this, " he said. "But first I'll paper trade."
"That would be a mistake doc. When you paper trade you don't feel the emotions that all traders feel. If the trade goes your way you start counting your gains, and maybe get greedy and take your eye off the chart you're trading. If the trade does against you, you're likely to worry about your lossses and how they might grow and again take your eyes off the chart. The chart is they key, it'll tell to what to do. Not always, but a lot of the time. I suggest you use money, your money, but start off small. Gain a bit, lose a bit and feel those feelings. After a while you may become proficient."
"So how do I become proficient?" he asked.
"You have to learn to read a chart, hear what's it's telling you. Sometimes it whispers, "buy me" or "short me." Sometetimes it says nothing at all."
"And how do I learn what a chart is saying?"
"Well doc, I occasionally teach traders how to do this. See doc, I go into the futures marketplace each day with cash in my pocket. If fortune smiles upon me I leave with more cash than I started with. That's my style. What I do may not be right for you, but it may be worth a try. I'll do my best to help you. You've helped me a lot."
"What if I decide I don't want to trade futures and go back to stocks?"
"That's not a problem doc. Instead of looking at 1, 3 and 5 minute charts you can look at daily or weekly charts; any time frame that's comfortable for you. That way you'll find your trading style. And doc, finding the trading style that's comfortable for you is probably the most important factor in becoming a good trader."
"What's this gonna cost me? he asked.
"For you my good friend, there will be no charge."
At this he began to sob again. I handed him the box of Kleenex he keeps next to his lumpy, leather couch and took my leave.
Lee Kramer
copyright, May 29, 2005
AI
Market Data 
Markets 
