Thursday, July 23, 2009

Tour de France

You must be thinking this market is making me crazy: What Tour de France, the most prestige bicycle race in the world, has to do with trading?

I shall say: It has much to do with trading. It is very nice business and, for that matter, trading lesson could be learned by watching Tour over last two weeks: It's very difficult to improve your performance on the downhills. 

Yesterday we had one of the stages with many hills, followed by many downhills. Best riders, including Lance Armstrong, were pushing hard uphill, making their time difference grow and then they would just fly downhill being more relaxed and just keeping their advantage intact. Simply, the biggest portion of leaders’ advantage was made on uphills. 

So, we are hitting some sideways market and that’s when system like ours is not to produce stellar results. Not that we are losing money, but net winning number of points dropped substantially when compared to historical average of the system’s performance in various market conditions. Simply, we are in period when trades that were few hundred points in profit are closed flat and trades that were green get closed at the stop loss level. All in all – it is very frustrating period for trend followers.

However, we are on the uphill section of our trading, so we must work, learn and find better ways of trading. Hills are where all work is done - When trend develops, downhill section of our trading will start and that is when maybe 2000 points, maybe more, will be made per month. 

I believe that most of traders spend their days looking forward to those rare moments when everything goes right. Imagine how much leverage one would have if one spends his/hers time maximizing those common periods during which everything is not absolutely smooth and easy.

Trade with trend.

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