Thursday, May 13, 2010
Focus On What Matters
Q: Like countless traders, I saw many of my positions stopped out last week, only to see them rebound to at or near where they were before the "flash crash" (e.g. AAPL). As you reflected in your recent comments, traders such as myself are still dismayed, indeed, angry that this happened. I can accept getting stopped out in any kind of market. Yet, I can't help but be angry that program trading, which accounts for about 2/3 of the volume on average, led to an environment in which a trader such as myself cannot possibly react quickly enough to adjust stops and other orders. However, the program traders, who were mainly responsible for this debacle, were able to react in a micro-second and reposition themselves. I'm generally opposed to over regulation of markets, but what happened last week is outrageous and should not be allowed to happen. I'd be interested in your thoughts and opinions.
A: We can sit here and complain until the cows come home about how unfair the markets have become or how dangerous this new environment is and what needs and should be done, but here's the question - how does that put more money into your pocket?
You and others may not like it when I ask that question (especially in a snarky tone), but for those of us who make a living (or hope to), please leave the opinion generation commentary to those who are paid to provide it. I know some of you think that's my job here, but I beg to differ.
My job is to help keep you focused and not to go off on some time-wasting rant that isn't going to help you trade or invest better. I'll still do that from time to time as I can't help myself, but I try not to as it is always a waste of time and energy. Matter of fact, if traders put in as much time and thought into their own trades this week than they have about complaining about how the markets work unfairly against them, they'd be a whole lot better off.
When my email inbox is flooded (and it has been) with questions of this nature this week, I have sufficient reason to believe that too many of you are focused on what has already happened instead of focusing on what is going to happen and more importantly how to profit from it.
Yes, the rules of the marketplaces are changing and have been for some time now in seemingly very "unfair" ways, but I for one remain confident that I can find and use new methods that will enable me to trade profitably even as market dynamics change. In some ways, these programmed trades are becoming easier and easier to spot and trade around (just my opinion) and those who are trading now are working intensely on strategies that help them do exactly that. In my opinion, that's the much better way to go and will be far more helpful than complaining about things none of us have the real opportunity to change or profit from.