Tuesday, January 4, 2011

Time frames

What is your time frame? What are your strengths?

As a starting out local in the Australian Dollar pit at the CME in 1992, my primary time frame that I held a trade from start to finish was less than ten seconds. The average volume of the A$ was about 1000 contracts a day, compared to the DMark that averaged dramatically more volume at that time.  The market in the Aussie was inefficient.   This allowed me to exploit an edge. I was a arbitrager mostly at that point in my career.  I essentially didn't trade unless I knew I had an edge, meaning that the resting bid or offer in the pit was out of line to the cash market. That style ended unfortunately.  As the Australian dollar market changed at the CME, more competition came in to drive out the inefficiency that briefly existed. 

My little niche I carved out vanished.  I needed to discover a new style of trade to profit from or leave the trading world.  It was at this point that I had the great fortune to find a man named George(Sandy) McRae.  Sandy had a system based trading model and he took me under his wing and became my mentor.  My time frame began to change from the arbitrage to a blended swing trade/ long term positioning.  I continued to trade the aussie and because of more liquidity in the market was able to scalp trade to take advantage of the short term ebb and flow.

Sandy's system got me to look at the markets in a new light.  I elongated my time frame for my trades as well as learned more markets to trade.  During the learning process I made mistakes but Sandy never beat me up for the mistakes.  He did point out why I was wrong and how not to make the same mistake again.  He also took ownership when his system didn't work.  As I learned Sandy's system, I discovered what my strengths were and what time frame worked best for my personal style.   It turns out that I was a macro thinker.  I saw things in the market that others didn't see yet.  Sandy got me to believe in my ideas and help me manage those macro ideas.

While I have continued to at times to trade markets on shorter term time frames, my historical P&L proves that my strengths lie in taking long term trades.  I have gotten lulled into the belief that I could profit as a short term trader.  However as soon as I get that feeling, I am humbled by the market. When I trade short term my emotions have usually gotten the best of me.  I have made so many trading mistakes over the years and at times refused to except they were mistakes and made them again and again. 

Except your weaknesses and work on your strengths.  If you let your weaknesses define you as a trader you are done for as a trader.  If you can identify what time frame and style work for you the best, put all your efforts into building on them.  You will be much happier and more successful focusing on what you do well rather than mentally beating yourself up for the weaknesses that you have.

The Evolving Trader   

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