Blog

In the post-holiday quiet, I tweeted yesterday inviting my followers to think about the one thing they could do in the coming year to improve trading results. I hoped to provoke some thought, and knew that the answer you come up with probably is unique to you—some of the best ideas will never be shared, nor might they be particularly valuable for anyone else. Even so, I was swamped with insightful and interesting ideas for people to make themselves better in 2017.

In the spirit of that sharing, I thought I would share a very personal look at my own work over the past year, along with some challenges and new directions for 2017. (I had a recent post that covers a few of these things, but my thinking continues to evolve.) Though I think there’s little value in a New Year’s resolution (a nearly sure way to fail at whatever you are resolving lol), there’s great value in periodic reassessment and course corrections. Think of these notes in that spirit, and let me share some of my most recent thoughts.

What I’ve done really well

I’ve worked my process with near-perfect discipline. One of the things I stumbled onto, years ago and purely by dumb luck, was the idea of writing a “market letter” every day long before I had enough experience or knew enough that anyone would care what I had to say. I started doing this in my very early days of trading (yikes, over 20 years ago) and the old letters now give me a good perspective on my growth as a trader.

Though those early efforts were very misguided, writing them forced me to do daily, routine analysis of markets. Of course, I had the luxury of simply not doing them whenever I felt like it, but that’s different today—today I write a daily research piece for my clients that looks at every liquid asset class. (Edit: my work is now available at Talon Advisors.)

Though it might be an enforced discipline, it is a powerful discipline—every day, no matter what I am doing or where I am in the world, I do the same thing: I do a top-down look at every major commodity, global stock index, and nearly every liquid currency and crosses. I’ve also learned how to work smarter over the years and I use a finely-tuned set of screens and filters to highlight the points on which I must focus my limited resources of attention. I take notes every day, track trade setups and triggers, and move stops on open trades—every day, without fail.

My growing edges—what I can do better

In the coming year, I will need to budget my time very efficiently, as I have a few large projects that will consume a lot of time. I have a major book that needs to be written, am working on getting a few important pieces of software to market (stay tuned for more info on that), and I also have a number of personal projects that will demand a lot of time—I’m returning to working on music, and have started rebuilding my piano technique from the ground up. I want to continue to do deeper work in meditation, and want to work on my health (exercise, diet) with more focus. Though I have a strong background in classical French cooking, I have always felt my understanding of wine is somewhat limited compared to what I know about food. I’ve laid out a 10-12 month wine “course” that will involved multiple (but small!) tastings several times a week with a number of blind tastings for cross checks. There’s time for all of this, but I will need to work very efficiently to make it happen in a sane way.

My Waverly work is a good barometer because it provides a very public record of my thoughts about markets, along with specific “example” trade entries that quantify the edge in my approach. We’ve come off our second-best year ever, and have had long strings of unbroken winners. This, of course, is a natural outgrowth of my disciplined application of a process with a real edge, but I’m always looking to go deeper—always looking for things that could be better and stronger, and, as I do a deep self-inventory, I realize I may still be a bit too attached to results.

This is problematic, because good results (over a large sample size) are one of the key ways we understand if we are trading well—the bottom line, to many people, is all that matters. However, trading turns all this common sense stuff upside down, and we really need to move toward a state of open acceptance and non-attachment to results. Most days, I’m there. Realistically, I’m probably in that state much more than most traders and I rarely get upset about losses, frustrated, or overly happy about wins. However, I’m still not where I want to be. It’s impossible for me to see a long string and winners or losers and silence the voices in my head completely, so I still have work to do!

I also have neglected research and probably don’t read enough. Again, there’s a bit of a cognitive dissonance here—I have a process that works well, so why not just keep doing that? Maybe we risk upsetting the apple cart if we add new things to it? In practice, I think research is important for many reasons, and it’s something that I need to do more of in the coming year. I also read about 2-3 non-fiction books each month, and more exposure to more diverse ideas and thinking would be a positive. If at all possible, I need to find time to do more of that.

Bold new horizons

I mentioned a few personal projects above, but I’m also branching out into a completely new kind of trading (for me) that involves a heavy focus on relative value plays. Though you won’t hear much about this, it will be consuming an enormous amount of my time behind the scenes.

I also want to push this blog into some new areas, some of which may be uncomfortable for me. I work very hard to write about things I know with some degree of certainty, and I want to explore some more uncertain fringes (such as how statistical tests may fail, blind spots, and ways that we might combine tools to find superior edges.) I also want to write a series of posts for the beginning trader, and am excited to see how this overlaps with my work on the new book. I also am doing more work on psychology and focused performance, and we’ll see how that trickles through to the blog.

While I’m pleased with what I’ve accomplished, the work is never done. Constant attention to detail, and a careful allocation of limited resources are essential to success—the higher we climb up the mountain, the harder it is to take the next step, but that’s exactly what we must do. One step at a time—onward and upward. Wishing you all possible success and achievement in 2017.