This is the first post in my new trading adventure – The Game of Guessing Right. I think of this as following in the cleat-steps of George Plimpton, a sportswriter who tried out for third-string quarterback on the Detroit Lions to write Paper Lion. While my body will be spared the abuse his suffered, my ego may not survive. Reason enough, in my opinion, to challenge this Goliath. Ego is terrible at the Game of Guessing Right.
This also explains my financial incentive. Like George Plimpton, I am writer, and the lessons gleaned during this public self-abuse will perhaps become a cautionary trading tale of more value for advising you what not to do, than instructing in the alchemy of creating golden eggs.
I am preparing to create a daily practice cycle to accelerate the education curve. My original Opening Move Workshop was based on the practice of making ONE trade a day. I believe that some of the advantages of this approach are-
A Daily Learning Cycle
Stimulus/Response/Consequences/Analyze/Adapt: With long term trading you place a trade and wait weeks or months to find out if it was a good play. The Opening Move Workshop completes the learning feedback cycle every trading day. A few years back I got into trading with neural nets. The most valuable thing I took from that research was the power of the iterative training cycle. We all have a neural net behind our eyes. Some exercises are far more powerful in training our neural net from the feedback cycle.
I actually use to regret weekends because the market was closed. I got a little taste of that again waiting for this last weekend to be over so I could begin the trading cycle. I work full time during market hours, but I have a (paper) horse in the race. This adds some juice to my work week.
I created the first Opening Move Workshop back at the dawn of day trading after reading Secrets of the SOES Bandit. I was working with my father, Ralph Pierce, author of Stocks, Options & Spreads, in our family trading room. I quickly realized the less distance into the future and the less magnitude in price movement that I had to predict, the more consistently I should be able to predict accurately. Day trading “scalpers” can make hundreds of trades a day, which sometimes last only seconds.
Back then they were scalping 1/8 of a point spreads between the Bid and Ask, before prices went decimal. I was day trading with a $5000 account, while day trading now requires a $25,000 minimum. In a sense, Opening Move is a swing trading approach, but you get only one play a day, and you never hold overnight. This means that if your account is under $25,000, you can only trade 3 times a week. This forces you to discriminate, looking deeper and harder at your one opportunity, which intensifies the exercise of trade selection.
I have already mentioned the powerful advantage of a daily feedback cycle. This extends to earning potential. This exercise places your entire trading account, at 50% margin, on the table every trading day.
I work full time, or I might very well spend my days sitting in front of a screen watching the market happen. However, there is also a powerful learning advantage to an automated trade management approach. I mentioned the Trade Selection Exercise. There is also a Trade Management Exercise intended to tune your Trade Management parameters to your Trade Selection choices. The theory here is that depending on what behavior you are selecting trades for, optimal management parameters can make the difference in outcome. An Opening Move Trade Rules follow this format –
- Buy on Open
- Sell if Stop touched (Percent below Open)
- Else Sell if Target touched (Percent above Open)
- Else Sell on Close
Golden Egg (Not!)
The most valuable thing I hope to provide workshop students is not the Golden Egg Surefire Trading System. This is not the Goose that lays Golden Egg Surefire Trading Systems Design workshop. The most valuable thing I hope to provide workshop students is training in the process of evolving your Golden Goose’s ability to lay increasingly valuable Golden Eggs.
The Opening Move Story is the story of how your trading story evolves. It is designed to both deepen your understanding of the Buyer and Seller Forces moving prices, and feedback a quantitative reality check on how well you predict price movement. It is designed to help you tune your Trade Management Parameters to your Trade Selection Parameters.
The Workshop Competition
This time, I intend to add a student competition to the workshop. The theory here is that you enter your trade before the market opens every trading day, and the trading result analytics are revealed after the close. This data created by the student competition may be extraordinarily valuable. You will be able to see the Trade Selection and Trade Management histories of the students who are most successful. Think about that as you back away from exposing your secrets.
If you ARE one of those demonstrated master traders, that could boost your reality-based community chops if you are in the industry. If you are a 14 year old trading genius, a masterful demonstration may motivate a job offer, such as trading their account and splitting the profits. Also, you can win free months to remain in the workshop. You can also subscribe to ongoing membership at a reduced cost once you complete the workshop if the ongoing access to the competition is of value.
These are just some rough notes on where this site is going, perhaps. I got my ass handed to me again today, which is to say, stopped out. I am going to start publishing my daily trade and what I learned from it. Still working out the format of the journal posts. What I don’t want to do at this point is publish my pick until after the close. I suppose you will have reason to suspect I am cheating if I start killing it. Haven’t figured out how to resolve the conflict between credibility and potentially influencing the outcome by publishing before the Open.
More likely, this is going to be a story very much like that time I spent three months in Costa Rica trying to learn how to surf, and barely survived. Every day I am going to paddle out and get my butt kicked. Every day I am going to try to figure out what I did wrong and how I can fix it, then paddle back out.
One of my favorite authors, Robert Heinlein, once wrote – “Never precede a difficult task with anything more specific than – Watch this…”
Next in Trader’s Journal – Don’t feed the bears…