Finding Your Trading Style

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There's not much about the market I want to talk about today. I got stopped out of a handful of my positions, but on the whole today pretty much just set about reversing yesterday's progress. We'll see what the retail and jobs numbers hold for us in the morning.

In the meantime, I wanted to wrap up with a post about trading style. My belief is that learning how to trade is one of the richest processes of self-discovery a person can undertake, provided that person is highly dedicated to learning the art of trading and has enough introspection and flexibility to learn and grow. For myself, the process has been long – measured in decades – and difficult, but I can say with confidence I am a little bit better at what I do with each passing year.

But in the course of trying to learn to be a good trader, you are going to need to adapt your own personal style. By "style", I don't mean a bromide like, "a trader who makes a lot of money" – - or, less glibly – "one who trades what he sees"? I think those are empty characterizations, no better than saying your philosophy of life is to "try to be a good person and do the right thing."

My point of view is that trading style encompasses several areas:

+ Quantity - how many markets/positions do you plan to trade? One? A handful? Dozens? Hundreds?

+ Basis - what will the basis of your decision be with respect to what positions you will undertake?

+ Frequency - how often do you plan to enter and exit positions? In other words, are you a day trader, a swing trader, or an investor?

+ Bias - do you have a bullish or bearish bias? I believe the vast majority of people have a bullish bias, in spite of their declarations of neutrality. (The old saw "I trade what I see" is the safe route, similar to a political stance of "socially liberal and fiscally conservative" – - meaningless).

+ Security - what kind of securities do you like to trade? E-minis? Penny stocks? Blue chips?

I'm sure there are other elements, but that's not a bad start. For myself……..

Quantity - I like a lot of small positions in order to spread my risk. Once I get my trading mojo back into full gear, I wouldn't be surprised to have a couple of hundred positions.

Basis - I'm a chartist, pure and simple. I use my experience of having viewed hundreds of thousands of charts as the rationale for my decision-making. I don't use technical indicators at all.

Frequency - I would like to trade only occasionally, but in this market, where I've been pretty consistently stopped out of a variety of positions each day, I'm having to be much more active than I'd like. My preference would be holding periods measured in weeks or months.

Bias - Hold on to your hats, but……….I have a bearish bias, and I'm bear enough to admit it. There are a handful of stocks that I like on the long side, but until I feel the market in general has positioned itself for a sustainable, legitimate push higher over a multi-year timespan, I'm not interested in getting real long.

Security - I gravitate toward stocks that trade at least half a million shares a day – hopefully much more – and are typically priced between $20 and $90.

What got me thinking about all this was an examination of Covestor, and particularly a look at my friend Tim Sykes' amazing trading success. He's a penny stock guy, and having looked at a bunch of the charts he trades, I decided that penny stocks just aren't my bag. God bless Tim for doing so well, and teaching others to do so too, but it just isn't my style (as timelessly fashionable as making money might be).

Anyway, that's it for me today. My experiment with guest posters has largely been a bust (a handful of folks notwithstanding), so I don't think you'll see anything new until the morning. Sweet dreams!

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