Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

What Did I Learn Today?

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Well, a brief anecdote…….and then I'm going to bed, because I am tired.

Disneyland is fun for little kids, I suppose, but it encompasses the kind of "fake" that drives me right up a tree. Even the place we're staying – Grand California – which is their "nice" resort – looks like it's made of the world's largest beams of plastic wood. It's supposed to look like arts & crafts style wood, but I don't think it's fooling anyone.

Mrs. Bear signed us up for "character dining", which means that you get to sit down to an overpriced meal and be assaulted by a swarm of princesses swinging by your table to chat. Those who know me even a little bit can understand how cringe-worthy the entire experience was, but – – anything for the little girl, right?

Anyway, it's sweltering hot here in Southern California (which just adds to my already chummy mood), and at Ariel's Grotto, they seated us outside (!). The theme park is working on all kinds of huge projects slated for 2010 and 2011, and although they sound pretty spectacular for those attending years from now, at present it's kind of unpleasant. In fact, this is the view from where we sat down for our fine dining experience:

0827-construc

Nice, huh?

So we had four princesses swing by the table – – Belle, Ariel, Snow White, and Cinderella. It took everything in my power not not crawl under the table. I felt the worst for Snow White, because she had to affect this kind of muppet-like weird voice to sound like the original animated character.

Well. Enough of that. One comment on trading before I collapse in a prince-like heap.

I read somewhere that Dr. Brett Steenbarger suggests that, at the end of the trading day, you ask yourself something that you learned. I learned something very valuable today, and I'm going to incorporate it into a rule I'm working on which is going to replace one of my existing rules. So I'm not going to word this very well right now, but you'll get the jist of it.

Relatively early in the day, my many short positions were experiencing very good gains, and I thought to myself, "perhaps I should go long the /ES just in case things start climbing – – just as an insurance policy." I didn't, and the /ES marched from 1015 to 1030 without me.

I think if you are positioned heavily a certain way, and the market moves in that direction a meaningful amount, there is no harm in making a day trade counter to your positions in order to ameliorate the effects of a reversal. If it keeps moving your direction, fine, the loss will be modest, and you'll more than make up for it with the continued prosperty of your positions. If, however, things move against you, then you've got a valuable counter-position in place to ease the pain.

Like I said, I'm going to put this into a more formal form, but this was my big take-away for the day.

Brutal Honesty

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I'm not going to open up the bar today. Sorry, Bo. This just isn't a day to celebrate.

It is, however, a day for some stark honesty……….the deep dark truthful mirror. Because, as traders, we need to be honest with ourselves on a daily basis. The truth hurts sometimes, but pain is good in the long run. Life means suffering, as the Buddha said.

I will start by presenting this paragraph from a post I did this March; I have emphasized a few portions of it.

To my way of thinking, if the market moves to around 770, stabilizes, moves higher, and then pushes past 830.50, that's a very good sign for the bulls. It basically indicates whatever extra "air" had lifted the market quickly from 666 to 830 has been released, and the strength continues. The overhead supply from 800 to 870 is going to take a lot of work to push through, but if and when that work is done, there's going to be a lot of power behind the bulls. A 2009 high of ~1050 is, I think, still in the cards. I sure hope so. It's going to be a total bear-fest if we can get that high.

Now, just in case you think this bullish conviction was just a once-in-a-blue-moon thing, it's not. I have mentioned 1050 over and over and over again, as this Google search illustrates.

So here's the brutal truth for me: my inability to embrace and act on my own excellent analysis was probably the biggest failure for me as a trader thus far in my life. It makes me disappointed in myself, and it diminishes my reputation. But I still am here, day after day, head held high, in spite of my abject failure to execute properly. Outstanding analysis and failure to execute combine to yield nothing.

I'm going to try to be a little more discrete about my account size, but let's just say this – – I hit my peak back in March at a figure we can call 100%, and I've spent the past five months grinding between 100% and 85% ever since (some detractors probably figure I've lost 95% of my account, so I'm sorry to disappoint you goons). I've been creeping toward 85% more and more, and I'm there right now. In other words, I'm at the low end of my range, and that stinks, considering how accurately I "called" what was ahead back in March.

Bottom line: be honest with yourself, day to day, hour to hour, minute to minute. Anything else is a fantasy.

So I'm ending the week on a low note. I'm near the bottom of my equity curve over the past five months, and I stare in the face of a prediction that would have been profoundly beneficial to me. The only silver lining to this very big cloud is that 1050 is tantalizingly close.

I only wish that I had in my pockets the profits I would have amassed if I had followed the pathway that I laid out myself.

They Imperceptibly Slumped

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Today's post is going to be a little unusual – – it is simply a clip from one of my favorite movies of all time, Glengarry Glen Ross. And, no, it's not the Alec Baldwin speech – – I'm not that predictable.

This clip is with Jack Lemmon and Al Pacino. Lemmon's character, Sheldon Levine, has, at long last, bagged a sale. He has been on a losing streak for a long time, and he finally bags a winner.

The way he tells the story – and, most importantly, what it feels like inside for him – is amazing to watch. (GGGR fans will kindly set aside the fact that Levine's victory is a Pyrrhic one, as that would take away from my point). In any event, today was a sensational day, and I invite you to enjoy this marvelous bit of acting by two of the greats (please note some of the language is R-Rated, so don't crank up your speakers).

There Is No Holy Grail

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On the bookshelf behind my chair are a series of binders, one of which is labeled Tim's Trading Tome. It is thick with articles and charts, and at the very front is a lined sheet of paper on which I wrote the following last Autumn. This is the entire entry, and I've boldfaced a couple of key items for emphasis.

"There will be economic depression and deflation bottoming ~2014-2016. As of late October 2008, "A" wave is near an end and strong "B" is imminent. Ideally, the market will ascend to former failure levels. If the market ascends that much, it will create the shorting opportunity of a lifetime with a "C" wave that should crush past 2008 lows. The key thing will be patience to wait for the completion of "B". It will be hard."

Now, ten months later, I still subscribe to this thesis. I was early calling for the bottom of the market in October – – it had another, slightly lower, bottom in March. But I was certainly right with "It will be hard" – – dealing with the past five months has been exceedingly hard.

But in today's all-text post, I wanted to make a point that is very important to me: there is no holy grail for traders. I've been doing this a long time, and I've been exposed to a lot of different products, methods, techniques, and trading dispositions. There isn't a single method which is a surefire way to make money. Not one.

My philosophy on trading has this important premise: it's all about your relationship between yourself and the market. The market, you cannot control. Yourself – – to a degree – – you can. And it is the complexity of yourself vis a vis an ever-changing market which makes the entire enterprise of being a trader simultaneously fascinating, exasperating, and thought-provoking.

As the old saying goes, you never step into the same stream twice. It is the same with the markets. They are ever-changing, particularly in the present time, and there isn't a magic bullet out there which is going to let you nail profits month after month, year after year.

There was a time, particularly last year, when I thought I could find such a thing. I was open-minded about just about anything: I would gladly look at astrological cycles, numerology, and a variety of obscure techniques for ascertaining market turning points.

Some of them worked. Most of them didn't. But instead of latching on to one particular method, I have, over the years, adopted a handful of methods, and I've put them into my own unique trading stew. I am refinining it all the time – – weighting some "vectors" I am monitoring more, weighting some less. But the concoction is best suited for me and who I am. It wouldn't work as well for most other people.

It's important to embrace one's perpetual ignorance. I seek mastery by considering myself a dunce who is in search of knowledge. By no means am I suggesting piling on rule after rule, method after method. I view the act of trading not much different than making an ongoing series of bread loaves. I'm changing the recipe a little each time, and I'm kneading, kneading, kneading the dough (that is, my positions, their weighting, and their stops) in order to try to get the result I'm after. Metaphorically, a delicious loaf of bread; realistically, a nice, outsized profit.

The fact that learning to be a great trader is a very personal journey is very much why I stopped buying business books many years ago. When I was in my late teens and early twenties, I bought business books all the time. I figured they would help me become a more successful business person. They didn't.

I've got shelves of these books, and I don't think I learned a thing from any of them. It's not because I didn't read them carefully. But the fact is that most "how to" books are based on the notion that If You Do What This Person Did, You Will Be Like This Person. But you know what? That person is that person. He isn't you. And the circumstances he found himself in (whether he's Jack Welch, Tom Peters, Steve Jobs, Mark Zuckerberg, or God-knows-who-else) are unique to that person. If you want to read a biography, great – read a biography. But if you want to be like that person – well – that's spot already been taken.

This isn't to say there's nothing to learn from books. But I think books related to business or trading are best applied to either (1) the actual mechanics of trading techniques and their application; and (2) learning from the successes and failures of others in order to "template" those events to your own personal experience. That's why I found the Paul Tudor Jones videos so electrifying. I don't have any illusions that I'm going to be a Paul Tudor Jones. But I do draw inspiration from his resilience in the face of defeat and his successful use of past markets to present ones.

If you're read this far, and you're feeling philosophical, read this essay by Seneca on The Shortness of Life. We should be humbled at how wise our distant ancestors were.