My style as a trader has morphed over time to enable my survival.
Survival might sound like an odd word to associate with trading, but the fact is that it’s a top goal of every professional trader. Staying in the game not only prevents having to go out and get a ‘real job’ but it also opens the door of opportunity for profits on a daily basis.
Those who have blown out trading accounts know exactly what I’m talking about. Without trading capital, account growth isn’t possible, and neither is the freedom of self-employment as a trader.
Self-Directed
I grew up playing baseball until age 13 when I’d grown tired of lazy teammates and took up the individual sport of golf. I pursued it 110%, eventually becoming a 4-time NCAA All-American. I turned professional after college in an effort to make the tour, but my growing interest and success in the markets resulted in a career change.
My foray into the markets began in 1998 when, after getting married, my wife & I ‘invested’ in some mutual funds. That summer, a major hedge fund collapsed (thank you Long Term Capital Management!) and took the market lower. We were surprised to receive our account statements and find that we’d lost money. My attitude quickly shifted, and I decided I’d rather be self-directed than let someone else manage my money.
The School of Hard Knocks
From there, I studied, read, and traded everything in sight. I learned some tough lessons, but I also saw my passion explode for trading. By 2000, I had gone full-time and was in an office trading each day with a few dozen other day traders.
That number dwindled to 3 over the next 18 months, as the market peaked and took out a ton of traders. Their mistakes built my resistance to unnecessary risks, and I learned a lot from the poor choices of others. To clarify, I also made my own mistakes – plenty of them!
I had some other friends an hour away in another branch office and decided to commute to trade with them for the next few years before becoming a home-based trader in 2005.
Shifting Styles
When I started out, I was a position trader, holding stocks for a few months at a time. As the market momentum increased during the great bubble of 1999 and into early 2000, I was doing much more day trading. The daily movement simply allowed for great opportunities, particularly on intraday margin, so I rarely held overnight.
As the daily trading ranges collapsed into 2002 and early 2003, opportunities for day trading dwindled considerably. I had to zoom out on my timeframe and that’s when I started swing trading for multi-day moves. That allowed me to keep my risk/reward profiles at acceptable levels (I prefer my risk to be a minimum of 1/3 of what I expect to make if a trade works), and swing trading allowed for that.
It wasn’t easy to make the shift, but it was a requirement for my survival, so I did it.
Since Then…
Over the years, I’ve faced periods where day trading is the best approach, and others where swing trading was the most sensible method for the trading environment. It changes, so I’m grateful to have experienced multiple types of markets early in my career which taught me to effectively trade both timeframes.
Truth be told, my favorite kind of market is one which allows for trading on both timemframes. I love when there are existing trends to participate in via swing trading, while producing some daily cash flow via day trades.
So, if there’s one thing I’d stress to you today, it’s to expand your trading skills to accommodate for trading whatever conditions come your way. Otherwise, you’ll either be frustrated or completely sidelined when conditions shift away from your preferred style.
…And, that’s a little about me. What’s your style? Shoot me an email and let me know what you’re working on to improve.