The slow days of late summer. How to profit without the mental anguish (SPY, AIG)
A lot of being a trader involves patience more patience and the ability to mentally survive slow periods in the market. Being a trader one can become almost addicted to trading, you can not for the life of it tear yourself away from the computer even in the slowest times for fear you will miss “the special trade”. I felt this way today, as AIG made another monster run i was away from my computer thinking, “if i was only at my computer i would have crushed it”. I cannot dwell on this, every trader needs time off to refresh and regroup.
Sitting a computer for 6 hours a day sometimes churning 100 tickets can become maddening when things are not trading like you expect. As fall approaches more and more 5 star trading opportunities will present themselves, we will probably not see trading like last fall (in the back of my mind i hope we do), but any increase in volatility will help fire up the motivation to trade aggressively. Aggressive trading is where the money is made, knowing when to be aggressive is almost as key as knowing what to be aggressive in. The only trade i have really seen this summer which has paid to be aggressive in is AIG.
Other than that you would get burned over and over trying to capitalize on names you have convinced yourself were 5 star when in reality they were 1 star. The mystical false 5 star has burned many a traders, this is the trade that looks like 5 star just because its the only thing trading in a stagnant market, but in reality is really 1 star. A good trader should know about this phenomenon, and eliminate its influence on the traders thought process. This brings me back to trading psychology, if you want to be successful as a trader you must know when to let off the gas, step back and refresh. Whatever that maybe, a vacation, two days off, a half day off or even a week, when you come back to your desk you will be refreshed and ready for the next move. Frustration should hopefully be released, if it is not then you probably should take more time off collecting yourself. From my own personal experience you can convince yourself through negativity you cannot win when the market presents no opportunity. I have seen this in myself, and through other people on the floor, traders who sit next to each other on the floor can feed off each others negativity, this cannot go on for long or you will convince yourself every trade is a bad trade. If you do this you will never win and will nickel and dime you account down to nothing.