This is going to be one of those "essay" style posts, which are uncharacteristically devoid of charts, considering the typical post on this blog.
First, a couple of bits of business. I'm not going to harp on market direction much, since I've made my point of view quite clear – – a hearty rise up to some level beneath 1173 that I haven't decided yet, followed by a pause of indeterminate length and then the best plunge of 2010. It's as simple as that. Whether that is days, weeks, or a couple of months away remains to be seen. So I'm not going to be repeating that until we're a lot closer to action.
The other I wanted to touch on is this: I got an email from an otherwise grateful reader who was somewhat irked that I didn't mention my massive short-covering yesterday morning more promptly (I did the post maybe 30 minutes after I had done so). He asked me, as a "small favor", to make a point of posting my portfolio changes in real time.
Errr, look, if any of you are doing this sort of thing – – – don't. By "this thing", I mean trying to ape my trades. I make no claims as to the accuracy, completeness, or timeliness of any of my portfolio changes. The only people who are going to get that kind of service are my partners, and that's because I'm managing their money alongside mine. But please – for your own sake – don't get the impression that you can simply read what I write here and mimick what I'm trading. I mention a few things here and there, usually if it occurs to me and when I get around to it, but it is by no means a real time "feed" of my actions.
Now, back to the business at hand: a few people have written me to explain why and how I sometimes manage a lot of positions. There are times when I have over 200 positions going, and I actually intend to get around 250 before the hoped-for Big Plunge that I anticipate. The typical feedback is, "gee, I an barely manage seven positions; how do you do it?"
For 99.9999% of people, I think doing this kind of thing is inappropriate. My view is that, for a person serious about trading, they dedicate many years of their life to shaping and crafting their own personal trading style. This style will hopefully conform to their own strengths and weaknesses so that it's appropriate for them and amenable to their trading success.
I've got more than my share of quirks; among them is an obsession with order. If I ever mention in the comments section that I'm going to take a break and sort socks, I'm probably not stating that in the metaphorical sense. I like things clean, organized, and manageable. I'm a neat freak.
This obsession with order has, in turn, made me obsessive about my watch lists, my trading platform, and my custom-made spreadsheet. These components are the instruments in my orchestra, and I'm their conductor. I run everything on my own, and between my one brain, two hands, three laptops, and four monitors, I'm managing what is often a large number of positions in a pretty large portfolio.
But why so many positions? Is it some kind of pathetic, male My Watchlist Is Longer Than Yours mind-trip? No; there's nothing Holmesian about my desire for a lot of positions. I've thought a lot about this, and there are probably two good reasons behind this.
The first is that, in the spirit of Will Rogers, I've never met a short I didn't like. In a market like this, which recently has become very friendly to technical analysis, there are such a glorious variety of shortable patterns, and I want to take advantage of as many of them as possible. For the move higher, I'm keeping it as simple as can be, with the likes of IWM. For the subsequent move down, I'm instead going to spread my bets very thin and very wide. On a down day, what I want to see out of this wide variety of positions is to be up more than the market is down.
The second reason may surprise you, but it's probably the more important reason for me: having this many positions slows me down. It gums up the works. It makes me less nimble as a trader. And that is often a good thing!
If, for instance, I decided to just trade the SPY and nothing else, I'd try to capture every squiggle and wiggle that happened, and that would probably benefit one party more than anyone else: my broker. We all know that, The Squid excepted, no one can take advantage of every little wiggle in the market. Having an unwieldly number of positions kind of forces a person to "sit tight" since, believe me, it is time-consuming to exit a couple of hundred positions. You might get out of 50 choice ones, and then throw up your hands and just decide to tighten the stops up on the rest. More often than not, that decision has been a profitable one.
So I don't expect anyone to have read this post and take any action based on it, except hopefully to dismiss the idea of trying to do the same. It's a huge amount of work, very much a full-time job, and it requires – – shall we say – – a certain kind of personality that gravitates toward this kind of system. This whole topic will be moot until such time as it is ready to "load up" again, but I've got a watch list of 350 symbols (whose list's name is, appropriately enough, Bounce House) that I plan to seriously considering entering. And that, my friends, will make 2010 memorable for all of us.
